‘No justification for govt to subsidise middle class,’ says CompCom on Gautrain

The Competition Commission believes the Gautrain rapid rail system was a big policy mistake.

It now recommends that the Gauteng provincial government take over Metro Rail, and integrates it with the Gautrain to run “a single system that doesn’t separate people according to class”.

Tembinkosi Bonakele, the commissioner of the Competition Commission, on Wednesday also said the formula for the allocation of public passenger transport subsidies has led to distortions that impact on competition between the various modes of transport.

Increased funding for subsidies to the minibus taxi industry through the government’s taxi recapitalisation programme is one of several recommendations made in the commission’s preliminary report into its market inquiry into land-based public passenger transport released on Wednesday.

Bukhosibakhe Majenge, chief legal counsel and acting deputy commissioner at the commission, said the inquiry was initiated because the commission believed there existed features – or a combination of features – in this market that may prevent, distort or restrict competition.

Bonakele said the inquiry looked very closely at the Gautrain model and compared it with Metro Rail services in Gauteng and found “huge inequities”.

“The Gautrain is heavily subsidised and operates very differently from Metro Rail from a services and integration point of view,” he said.

“There is no policy justification in a country like South Africa for the government to subsidise the middle class and decide to have no or lesser subsidies for the working class.

“The service levels the middle-class love, the working class also love.

“The safety they love on the Gautrain, the working class also love.

“The convenience of being on time, the working class also love that.

“So there is no public policy justification for this,” said Bonakele.

‘Inherently inefficient’

He added that trains are not meant to compete with each other, stressing that trains are about the efficiency of aggregating demand and it is inherently inefficient to have two trains, both going from Johannesburg to Pretoria.

What is required is a single system that is more reliable, and more regular times with a lower price moving between the two cities because you have volumes from the other trains, he said.

Bonakele said the commission understands that the objective was to remove cars from the highways and improve congestion but believes “that was a little short-sighted”.

He said the commission is engaging with the Gauteng provincial government “as it thinks about expanding [Gautrain] to say please think about how this whole thing can be integrated”.

Attempts to obtain comment from the Gautrain Management Agency were unsuccessful.

Commenting on the distortions in subsidies, Bonakele said the subsidy system is highly fragmented with minimum coordination.

He said there is no formalised subsidy policy although the Department of Transport is in the process of developing this policy now.

Subsidies disproportionate

Bonakele said subsidies are not linked to ridership, with minibus taxis transporting over 66% of commuters but receiving about 1% of the subsidies through the taxi recapitalisation programme.

He said about 40% of the subsidies go towards rail, which transports 9.9% of commuters and is in decline, while buses transport 23.6% of commuters and receive about 20% of the subsidies – largely the provincial government subsidies provided to the integrated public transport system, sometimes called BRT (bus rapid transport).

The commission has recommended that municipalities, with guidance from the Department of Transport and National Treasury, review the BRT system.

“In most towns and cities it has not worked. There should be a review that takes into account the long term fiscal and financial sustainability of the system,” said Bonakele.

“Crucially, there needs to be a model for the inclusion and participation of the mini-bus taxi industry. It could be the easiest way to transition towards a more subsidised system if you integrate them into that,” he said.

Read: Transcap’s bet on taxis and debt collection pays off

Philip Taaibosch, president of the SA National Taxi Council (Santaco; the governing body of the taxi industry), said the taxi industry wants commuters to be subsidised.

He said commuters should have a choice when it comes to the transport services they want to use, and that the subsidy should be based on a commuter subsidy.

He said the taxi industry still wants the taxi recapitalisation programme, the introduction of which was largely driven by safety concerns and the aim to renew the taxi fleet in the country.

Other provisional recommendations made in the inquiry report are that:

• Autopax, the holding company of two intercity bus services and a wholly-owned subsidiary of the Passenger Rail Agency of South Africa (Prasa), be separated from Prasa and become a separate state entity reporting directly to government.
• Prasa CRES (Corporate Real Estate Solutions), a division that manages all intermodel terminal facilities and other ranking facilities in partnership with municipalities, be incorporated as a new and independent state entity outside of Prasa to eliminate conflicts of interest and perverse incentives.
• The perpetual extension of subsidised bus contracts without going on tender inhibits competition be reviewed; and that where contracts are put on tender, government should consider breaking some into smaller contracts to create opportunities for new entrants and small bus operators.
• Dedicated transport authorities be established at provincial level in each province to prioritise public transport by local government.
• The Department of Transport promote an integrated public transport ticketing system.
• The Department of Transport urgently (within 12 months) develop a strategy for the devolution of functions such as rail to lower levels of government to promote the integration of public transport services.
• The creation of a specialised division with the South African Police Service to deal with all public transport-related matters, including conflict between metered taxi and e-hailing operators.
• The removal of all area restrictions for e-hailing and metered taxi operators.

The inquiry’s recommendations are provisional. Stakeholders can make further submissions until March 31.

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