Competition Commission inquiry into the landbased Public Passenger Transport Industry

Transcription

1 BUSCOR Competition Commission inquiry into the landbased Public Passenger Transport Industry Mpumalanga Timothy Mathebula 22/8/2018 Submission to the inquiry based on topics identified by the commission enquiry document

2 My submission to this inquiry will be based on the topics identified by the commission enquiry document. Item 6: Allocation of Operational Subsidies Item 6.1 The effectiveness of subsidised modes of public transport on the provision of public passenger services to the poor and the majority of South Africans I will focus my experience on our area of operations in the Ehlanzeni district of Mpumalanga. I believe that the best people to pronounce on this in our case would be the passengers who use our services. It is my contention that at the hearings held in Mbombela on the 10 th and 11 th of July 2018 it was evident that there is a huge satisfaction from this sector. I would say that what came out of the submissions is that Buscor does have breakdowns but as a passenger and an employee you are able to get to work because of the frequency on our routes. (Passengers are able to use other vehicles on the same route) That said, we at Buscor put first and foremost fleet reliability at the forefront, this means that we set ourselves targets and in the case of breakdowns, our target is km per breakdown and we have in the first quarter of this financial year exceeded this by 480kms. To put it in the words of Sanco Travelling with Buscor buses ease the stress and pressure in public transport. Item 6.2 Are subsidies benefiting the majority of the poor given that the subsidised services have limited accessibility compared to minibus taxis? I will again focus my response to our area of operation in the Ehlanzeni district where we command over 70% of the market in relating to other modes. We intend to maintain and grow this share as it is a determining factor in the shareholding of VOC s. A survey conducted by Endecon Ubuntu Engineering Services in October 2016 two year ago attest to this fact. In their findings on the survey of the Swalala IPTN route between taxis and buses they found that Buscor transport 71% versus taxis, 25%, and other buses 3%. 1

3 Table 1 VEHICLE OCCUPANCY (PERSON) - WINKLER MODE WEEKLY TOTAL WEEKLY % CONTRIBUTION TAXI % BUSCOR BUSES % OTHER BUSES % TOTAL % This is based on a survey on the intended route to be piloted by the City of Mbombela for the Integrated Public Transport Networks. It is unfortunate that when this survey was done, the City was preparing to conduct the same, i.e. surveys, but safe to say that nothing has happened till now. We are however from the company s side conducting surveys every quarter to see if we are dropping on these values and to answer the question precisely we are more accessible in our area compared to other modes of transport with the limitation of infrastructure to all of us. (by all of us I mean minibus taxis and other bus operators) Our biggest problem is our road networks that are not conducive to render an effective transport service. This I say because in the same area of the survey it is evident that people walk for miles on end to get to the main roads. I must say that the state of these roads (the arteries within these residential) is such that all modes use the main road. 2

4 Item 6.3 What is the impact of subsidies on competition between different modes of public transport? In the case of Buscor, subsidies are necessary or we would not be able to stomach our ever increasing cost of operating Table 2 depicts Table / / / / / / / / /19 Average over 9 years Dora increase Workers Cash increase % Sarbac % Jul 4% ATB increase Jan 4% CPI Diesel (Actual) Diesel % (19.08) (20.43) (16.13) (5.87) (12.37) (2.68) (21.25) (8.21) This is a quarterly comparison. For the year 2018 and 2019 we reached a 2 year agreement with labour to increase salaries by 9% and 8.5%. If subsidies were not provided then the fare increase would be very high. I do not know what the outcome of the wage negotiations was in the minibus taxi industry. It is however clear that increasing cost is eradicating the benefits of subsidies. 3

5 Our endeavour is and has always been to provide an affordable service to the passenger. It is clear that the ever increasing cost of operating will catch up with the low increases both of Dora and Workers Cash or Operators will have to increase fares substantially to cover them. Item 6.4 What measures can be put in place to ensure that subsidies do not prevent distort competition between different modes of public transport, in particular minibus taxis and buses? The question for me should maybe or rather be how can the minibus taxi industry be subsidized taking into consideration their particular circumstances? In our area as submitted by our passengers, Buscor is providing satisfactory service. I cannot from a bus operator s perspective pronounce on what should happen in the minibus taxi situation. In our Addendum to the Interim contract it states: Extract from Addendum to Interim Contract: 6.5 If it appears to the Operator that the passenger demand on a particular route or trip regularly exceeds vehicle passenger capacities, the Operator may apply to the Employer for permission to introduce additional trips to cater for such passengers. If written permission is granted and additional trips introduced, the Employer shall compensate the Operator therefore at the contract rate retrospectively from the first day upon which the passenger demand exceeded 45% of the seated capacity of the bus per trip and all cost incurred by the Operator prior to that day shall be for the Operator s own account. If we were to work on the number of seats currently at Buscor which is versus firstly 15-seater minibuses then you would be looking at 3103 minibuses comparing; with 18-seaters it would be 2586 minibuses; and 22-seaters If you were also working from rigid buses or 65-seaters then you would come out at a total of 716 buses. We currently have 434 buses out of this number we have 350 train-buses which carry 114 passengers and 22 bi-articulated buses which carry 138 passengers. 4

6 It is clear from the extract above that where we introduce a train-bus to assist an overloaded rigid bus, we should be introducing another rigid at additional subsidy for the additional kilometres but we opt to introduce a bigger vehicle and save on kilometres, saving the department money. We introduced 114 seats to replace 65 seats and this is 49 seats or 75% more that we introduced. 45% of a 65-seater according to the addendum is 29 seats more. Our motto is that we try where we can to afford every passenger a seat because of the long distances that they commute. I am not going to make a comparison to the bi-articulated bus which carries 138 passengers. My response is if you approach this question without balancing the playing field and see what the savings are with the current system, then you will arrive at a distorted conclusion. Item 7: Transformation Item 7.1 How best can meaningful participation of historically disadvantaged individuals be achieved in the industry? If we again look at the locality plan on page 2 it is clear that our people walk for miles on end to reach the main roads and my suggestion as per the Government s white paper on Public Transport is to use feeder services to the main routes. This means that smaller vehicles are used to bring passengers to the trunk routes and higher capacity vehicles transport them to their final destination in this example White River and Nelspruit respectively. Companies like Buscor that achieved good scores on their BBBEE scorecards should be encouraged. Buscor is a Level 2 contributor and is 100% black owned. There are discerning views on what sufficient empowerment is but it is verification of a company that attest to the extent of meaningful participation of historical disadvantaged individuals. 5

7 Item 8: operators Long term contracting between government and bus Item 8.1 What are the impediments to the competitive bidding process by government? The impediments to the competitive bidding process by government is that in the case of our operations. In 2009, there was an unscientific conversion by the Department of Transport from a ticket based subsidy to a kilometre based one. The amount of subsidy received at the time was divided into the kilometres operated and that was it. If we were to go out on a competitive bidding then a detailed operating plan will have to be drawn up which will have to take into consideration the spatial development from when interim contracts were initiated in We are going to almost 21 years where there has not been any change to how bus operations or passengers are subsidized. Other operators did get the privilege to go out on tender but Buscor since its inception has never been on a tendered contract or a negotiated one. Areas have developed but we are still compensated or the passengers are still subsidized the same way. If the department were to go out on tender then they will have to pay more for rendering of these services. Item 8.2 The impact of the lack of competitive bidding on entry and expansion of bus operators. The impact in our case is the same, we are growing in terms of demand but the subsidy has shrunk to such an extent that in the near future, the passenger will have to pay more. The alternative is that Buscor suffers the same fate as other operators and are unable to replace or recapitalise their fleet. It is true that this stalemate impedes entrance of new bus operators but the alternative to government is that they do this at a price. Item 8.3 What measures can be put in place to ensure that government s contracting system is effective and promotes competition between bus operators? In our area, we are the only bus operator, but if we were to talk of effective competition, then government will have to follow the example of 6

8 other countries and own operating infrastructure and assets. Bidders only come in and compete for the running of the operations. This in the case of our Government is not doable at the present moment. Item 9: Licensing Item 9.1 Buscor s experience in relation to applications for operating licenses. We are currently not experiencing any problems with the issuing of permits. Item 10: Price Setting Mechanisms Item 10.1 What is the impact of pricing on competition between the different modes of public transport on the routes where these modes of transport compete? We set our prices based on the effect of increases that we experience in the course of conducting business. We have quarterly meetings with our passengers at a Stakeholders Meeting where these are discussed or explained to them. This is the consultative process. These meetings are attended by officials from the Department of Transport, Mbombela. This is based on a cent per passenger per kilometre. Ladies and Gentleman, Thank you 7