MARKET INQUIRY INTO THE 5 LAND BASED PUBLIC PASSENGER TRANSPORT SECTOR. [●] 10 ________________________________________________________ JOHANNESBURG, DAY 2. 15 Tuesday 05 JUNE 2018 ________________________________________________________ PLACE: (CONSTITUTION HILL THE ATRIUM) 20 TUESDAY, 05 JUNE 2018 Contents Session 1............................................................................................................ 2 Session 2.......................................................................................................... 99 5 Session 1 CHAIRPERSON: Morning everyone. Today is the 5th of June 2018. This is a public passenger transport market inquiry conducted by the Competition Commission. This is the second day of the public enquiry process. I will like to 10 formally welcome everyone to this inquiry. My name is Bukhosibakhe Majenge. I am an Attorney currently based at the Competition Commission in its legal services division as a chief legal counsel and I am the Chairperson of the panel. My co-panellists are Ms Nompucuko Nontombana who is the Divisional Manager for the Market Conduct Division of the Competition Commission. The 15 second co-panellist is Mr Thulani Mandiriza who is a co-panellist in his capacity as the head of the inquiry’s technical team. Itumeleng Lesofe as well as Mr Jabulani Ngobeni who are from the Competition Commission will act as evidence leaders. Before we start we would just like to explain the rules that will be applicable to this inquiry. The first one is that the inquiry is open to all 20 members of the public, except when the Chairperson rules that part of the proceedings will be closed on grounds related to confidentiality or any other reason deemed justifiable by ourselves and all sessions will be recorded and streamed live online, safe for those sessions or part of those sessions which are Page 2 of 194 TUESDAY, 05 JUNE 2018 closed and in order to allow for the proper ventilation of issues the Chairperson, the panel as well as evidence leaders will pose questions to any person making oral submissions to this inquiry or any witness. The Chairperson will not permit any person neither personally nor through a Legal Representative to question 5 witnesses or any other person making oral submission during this public hearings, because these public hearings are not a judicial process. But are an evidence gathering process for purposes of a market inquiry. In the event that a stakeholder has an objection or comment or question in respect of any submission made during the proceedings, that stakeholder must submit an 10 objection, comment or question to the inquiry at an email address that will provide or to the Commission’s address and the inquiry will attend to that objection at an appropriate time. Due to time allocation only one Representative either personally or through a Legal Representative will be permitted to make oral submissions, other than witnesses the parties may wish 15 to call in support of their submissions. Where the parties anticipate that different Representatives will be needed to address different topics, appropriate arrangements should be made with the panel in advance. The panel may conduct joint hearings in terms of any number of persons in terms of which any number of persons may be combined as participants in the same proceedings, 20 if their respective submissions or responses seem to the panel to involve substantially the same facts. For purposes of today’s inquiry proceedings, we will receive a submission from North West Transport Investment. Welcome to the inquiry sir. If you could please state your full names for the record. MR DE BEER: Good morning Chair and members of the panels, members of 25 the public present here. Good morning to everybody. My name is Nick de Page 3 of 194 TUESDAY, 05 JUNE 2018 Beer. I am the Senior Manager responsible for operations at North West Transport Investments which is a state owned company based in Pretoria. CHAIRPERSON: Mr de Beer, you will see a piece of paper in front of you. If you could please take the oath or the affirmation, as you wish. 5 MR DE BEER: I will, I will take the oath Chair. CHAIRPERSON: You can go ahead. MR DE BEER: I Lombertus Nicolaas de Beer swear that the evidence that I shall give shall be the truth, the whole truth and nothing but the truth. So help me God. 10 CHAIRPERSON: Thank you very much Mr de Beer. I understand that you have made a submission, a written submission to the inquiry and your submission covers various issues. Before we our evidence leaders as well as the panel pose questions to you, we will like to invite you to very briefly give an outline of just the key issues or the just of your submission. 15 MR DE BEER: Thank you Chair. This submission was based on a letter that we received from the Competition Commission asking some clarity on specific issues which I have then included in the presentation and we will start off with the allocation of operational subsidies, transformation within the industry, a long term contracting between government and bus operators, the licencing of 20 vehicles and licencing en routes and then price setting mechanisms. Those were basically the issues that were highlighted in the letter that was received from the Competition Commission, and on which this presentation is based. So if we can then go to the allocation of operational subsidies. There was a question in the letter on how effective the subsidised mode of public transport is Page 4 of 194 TUESDAY, 05 JUNE 2018 currently in providing passenger services to the poor and majority of South Africans. Now if you will allow me, I will then just briefly go into there. Subsidised public transport services caters mainly for your daily commuters travelling from their homes to their work places in the morning and then the 5 reverse trip in the afternoon back to their homes. During this time in the morning, it starts round about five o’clock until seven o’clock. It is the peek time like we call it in the transport industry. Now currently only mass transport modes like your busses and trains are currently subsidised. During the off peek there is not really a subsidised service rendered by the mass transport modes, 10 because of the size of the vehicles, the cost of operation and then your lower demand during the off-peek periods. Your subsidised public passenger transport modes currently caters for approximately 32 percent of the total market and as I have indicated, during the peek times that these passengers are mainly making use of subsidised transport services. So in short your 15 subsidised public transport services currently are only benefitting passengers travelling during those peek times, and enables them to earn a living through employment which is mostly far away from their places of residence, and it is also only mainly focussed on your major cities and towns where your demand or the number of passengers that you, that you, that are subsidised through this 20 service is benefitting through this subsidy. Our subsidy is benefiting the majority of the poor, given that subsidised services have limited the accessibility compared to minibus taxis. These routes that are currently subsidised are was determined a long time ago. We have interim contracts that were concluded with the Department of Transport in 1996 and 97, and since then there has not 25 really been a lot of movement. There has not been an expansion of the service, Page 5 of 194 TUESDAY, 05 JUNE 2018 and the services are currently still rendered on the allocation or the routes that were identified in 1997 and we are still operating basically in the same areas. Your minibus taxis which is currently not subsidised are mainly operating on your shorter distances. It is due to the limited hours of your peek operation 5 when the demand is the highest and the shorter distances. The vehicle capacity makes it easy for them to load quickly, travel a short distance, do a second and third trip during that peek time. So ja, currently the minibus taxi operators are not part of the subsidised services for public transport. The impact on subsidies competition between the different modes of public 10 transport. The aim of the subsidies for public transport commuted bus sector is to provide affordable fares to passengers. In other words your subsidy benefit directly the passengers that we are currently conveying, and mostly over the longer distances. The high entry cost into the bus market in terms of vehicle prices and establishment of infrastructure to maintain these vehicles as well as 15 the high operating cost of a bigger vehicle and the longer distance operator due to the size of the vehicle, renders the operation of a bus fleet rather expensive when you compare it to your smaller vehicles, like your taxis. Passengers from poor communities who are the beneficiaries of subsidised services, would not be able to afford the fares that would be needed to operate the service without 20 any subsidisation from government. Government contracts for the operation of public transport services enables the formal commuter bus market to operate at affordable fares and has a further advantage to the passengers as the fares of the minibus taxi operations are kept in cheep by the competition from the bus market. What I mean by that is that your market you know the market dictates 25 that your prices are more or less kept in line. From your operators that are not Page 6 of 194 TUESDAY, 05 JUNE 2018 subsidised and the operators that are subsidised that can lower the fares to the passengers. Allocation of operational subsidies. What measures can be put in place to ensure that subsidies do not prevent or distort competition between the different modes of public transport, in particular minibus taxis and busses.