PRESENTATION TO THE SELECT COMMITTEE ON PUBLIC SERVICES NCOP

1. PRESENTATION TO THE SELECT COMMITTEE ON PUBLIC SERVICESNCOP Taxi Recapitalisation Programme 17th November 2004

2. Introduction Background Transformation of the Taxi Industry Objectives of the Taxi Recap Project The NTV and EMS tender evaluation outcome Necessity to review the recap tender process Public transport review Cabinet Decision to proceed with the TRP Financial implications of the TRP Timelines Conclusion TABLEOF CONTENTS Department of Transport

3. Taxi industry plays an important role in the economy and society. It transports a greater number of commuters on any given day, over 68% of commuters – making it the dominant mode within the public transport system. The minibus taxis used are currently unsafe, unreliable and compromise the comfort of users. Promote modal integration Introduction

4. History of hostility towards Industry under previous apartheid order. Deregulation of the Taxi Industry in the late 1980s. Government introduced the Taxi Recapitalisation Project in 1999 to address the unsafe conditions associated with taxis prevalent in the country. The average age profile is 12 years. Recognition that the Industry is unable to recapitalise by itself. Ensure sustainability of the taxi industry. Requests for Proposals for NTV and EMS issued by Government (the dti) in 1999 and 2001 respectively. Background

5. The TRP is but one critical intervention within a broader Government strategy for the industry. Formalisation and Registration of the Industry. Democratisation of the Industry (SANTACO) Be Legal Campaign Re-regulation of the Industry. Attempts at effective law enforcement Transformation of the Taxi Industry (1)

6. Role and Size of the Taxi Industry to be addressed. Necessity to consolidate ownership within the Industry (Taxi Cooperatives, Business Entities, etc) Addressing the saturation in the market. Integration of the taxi industry into the broader public transport arena. Discussion about the need for some form of Capital and Operational Subsidy in order to sustain the Industry. Transformation of the Taxi Industry (2)

7. Reduce road fatalities associated with unsafe taxis Promote public transport integration. Introduce electronic fate ticketing in the taxi industry. Enhance law enforcement through formalisation, regulation and control of the taxi industry. Introduce large purpose built vehicles (18 & 35 seaters). Promote public transport accessibility for disabled people. Stimulate the vehicle manufacturing sector at the time of the introduction of the project. Objectives of the Project

8. Recent Cabinet decision is that both the NTV and EMS tenders will be scrapped. Both tender processes evaluated by Government. The evaluation process revealed that the taxi recap project was neither affordable to Government nor affordable to the taxi industry. Average Retail Selling Prices was R300,000 and R500,000 for the 18 and 35 seater respectively. Disability specifications in both 18 and 35 seater ranged between R5000, and R35,000. For taxi operators to achieve a “break even point”, the project would have demanded a significant injection from the fiscus. The NTV and EMS evaluation process

9. For operators to make a minimum profit of about R5000, a month, the project would have required a huge amount from the fiscus. The above scenarios would have led to operators increasing taxi fares, so as to increase their profit margins. Government concerned that this would have been passed on to the commuters. The Best and Final Offer (BAFO) of the EMS preferred sole supplier (RSA EMS) was found wanting after being checked by the South African Reserve Bank (SARB). (evaluation process continued….)

10. The evaluation process had revealed that the project was not going to be affordable through the tender process. The non-existence of an acceptable EMS solution, posed a challenge, in that the “Taxi Recap Project” was inclusive of the EMS component. The non-existence of an acceptable EMS solution, technically rendered the “Taxi Recap Project” not possible. The removal or non-existence of the EMS in the NTV was going to push the RSP even higher, since bidders had stated their reliance on the EMS to ensure debt recovery with financiers. Necessity to Review

11. Despite these challenges, the need to replace the aged and unsafe minibus taxis remains even more urgent (Heart of the TRP) The need for the promotion of accessible transport for people with disabilities was also confirmed as crucial. (necessity continued….)

12. Department currently reviewing its public transport strategy and the distribution spend of subsidies. Travel patterns and demands confirm the pivotal role played by the taxi industry in the system. Review aimed at introducing the taxi industry into the public transport arena. Review seeks to promote integration and consolidation of public transport modes to increase efficiency and access. Also aimed at sustaining the consolidated public transport system. Need for effective regulation of the Industry. Need to strengthen the law enforcement strategies and initiatives. Public transport review

13. On the 21st October Cabinet approved the following: Cabinet confirmed the urgent need to proceed with the TRP in a revised form. The termination of the NTV and EMS tender processes. However, the replacement of the the aged taxi fleet will take place in a non-tender format. Publication of NTV specifications that increases road safety through Regulations by the Minister of Transport. Introduction of taxi vehicle bands from 9 seater to 35 seater. Cabinet approved a Revised Approach to the TRP

14. The Regulations will indicate the various safety requirements for specific vehicle bands/threshold. Two sets of Regulations to be published. One set for ordinary safety specifications and the other for ordinary safety specifications plus technically requirements associated with promoting accessibility for disabled persons. A once-off scrapping allowance of R50,000 to be payable to operators as an incentive for scrapping the old taxi vehicle. Cabinet approved (continued….)

15. The R50,000 payable as scrapping allowance is not conditional to the purchase of the NTV, but is only attached to the actual scrapping the vehicle. The operator may upon receipt of the R50,000 exit the taxi industry market and venture into other business. The R50,000 scrapping allowance is a fixed amount with no escalation over the 7 years of the roll out plan. Cabinet approved (continued….)

16. The revised approach to be implemented over a period of 7 years starting from the 2005/06 financial year at a cost of R7.7 billion. Access for the disabled persons remains a critical component. An additional incentive for both the purchase and operation of a minibus taxi meeting such requirements will be considered. Cabinet approved (continued….)

17. Whilst discussion on the subsidies continues within Government, the need for immediate intervention is recognised. To this end, there is a move away from subsidies specific to a particular mode towards public transport contracts. The Taxi Industry would be able to participate in this contracts. In this way, the taxi industry will have immediate access to subsidies on some of the key routes in the country. Transport MinMec Decisions

18. The following timelines are targeted for implementation: Draft Regulations by the Department, end of January 2005. Publications of draft Regulations for comment, end of February 2005. Publication of final Regulations by end of March 2005. Amendments to the NLTTA, Road Traffic Act. Setting of the necessary law enforcement apparatus (e.g Recruitment and selection strategy for law enforcers, development of a course module with TETA) end of June 2005. Timelines

19. Development of a business model for the scrapping payment allowance Implementation of the Revised approach in a phased manner. Timelines (continued….)

20. SIYABONGA! Conclusion