#205 Ideal vs practical regulation in passenger and freight transport

Public policies in the transport sector could practically nourish the root problems and give society a new route to branch on–is that ideal?

“Analysis of practical, as opposed to ideal, regulation must include explicit consideration of the incentive properties of specific regulatory rules and procedures used to set prices, the dynamics of regulation, the control instruments and information available to regulators, and the responses of regulated firms to all of these.”

— P.L. Joskow, and N. Rose Handbook of Industrial Organization, Volume II, Edited by R. Schmalensee and R.D. Willig. 1989

With the myriad of transport policies on the parliamentary table there seems to be a gap in the discussion. In South Africa, there’s a deep preoccupation with procedural policies, somewhat uninspired until recently. The Domestic Air Transport Policy was a key cornerstone for fair and economic competition, but that fell flat and far from the landing strip. Largely due to the policy advocacy for fair treatment of all players, in line with underlying international conventions. Yet, South African Airways needed to achieve a dual objective underpinned by economic and developmental policy principles. Of course this distorted the market to a significantly unknown extent, and now the consequences of such a distortion haunt both the Competition Act and the Public Finance Management Act (see the PMG meeting discussion on this issue). The ideal policy position was fair competition, equal treatment and the likes, but in practice a whole new vocabulary for public policy in the transport context is long overdue. 

Freight transport pressure groups may form influential advocacy clusters

Consider the Road Freight Transport Strategy (2018) and Implementation Plan (2019), both of these strategies are a response to a policy gap, but they only touch the truckload not its axle loading characteristics. In other words, they scratch the surface around the regulation of the road freight industry because there is an inherent policy tension between rail and road transport competition. The decision between the two is interesting. For the long-term and short-term view of public sector, increasing the utilisation of rail infrastructure is crucial for a decent internal rate of return in addition to the turnover rate of each asset. But, for the private sector the short term costs of loosing consignments to rail transport is reinforced by the number of operators, vehicle debts, assets and labour in addition to the addictive low margin contracts. These strategic positions do not grapple with the economics of the industry, but instead focus on the administration around the market. 

CASE STUDY: That was very tragic. We need more regulations in South Africa to look at the working conditions of truck drivers. Fatigue is a serious issue that employers need to look at and consider before they overuse truck drivers. In this country, we have lost friends and loved ones because of careless people who drive on the road while asleep. These big companies need to stop exploiting our people, they should make sure that a driver gets enough sleep before they get on the road, and are mentally and physically prepared to be on the road”. Truckers For Unity SA chairperson Derick Ongansie, 6 Feb 2020 

Yet, the 2017 coal driver strike, 2018 emergence of a national strike and later the 2019 years were torched with trucks torn to tarmac, 200 or more truck drivers trashed, and more than R1bn in losses in 2019 alone— this excludes the value of lives lost to the families dependent on these drivers. Here we saw a parallel political economy emerging, perhaps subdued only by intelligence forces and the economic contraction in the steel industry and other primary sectors. The All Truck Drivers Federation advocated for a coordinated freight driver market, with protective measures for domestic labourers. This is against the backdrop of the regional nature of freight movement in Southern Africa, require drivers of various nationalities. The question remained unanswered in economic terms, and thus unresolved and distorted. While the policies say one thing, or nothing, practice will prevail where non-decisions haunt minds desperately for a salvaging any “solution”. What happens when cargo moves from road to rail? 

“The basic dilemma that governments in Africa face with regard to the railroads is that the greater the volume of rail traffic, the lower the cost per ton mile, yet restriction of diversion to road transport may be both difficult and politically unpopular.”

John Due

John Due puts this quite well: he says there is much debate to go through when moving goods from road to rail in his 1979 paper. But governments struggle to get through this conversation because the popular narrative is oriented toward the benefits of road transport, not the “overall transport picture”. This is something quite important: in practice it has become axiomatic to consider road transport as the primary freight option, but ideally, rail transport should play a substantially bigger role in freight movements in Africa. 

Taxi associations may become vertically and horizontally integrated businesses

Consider the minibus taxi industry, with varying degrees of power and influence in local and provincial structures, it has now gone beyond the scope of the National Land Transport Transition Act of 2000, and the subsequent National Land Transport Act of 2009. The recommendations of the National Taxi Task Team published in the 90s were at the bosom of much of the initial policy formulations, but over the years amendments began to exclude the dominant transport mode. Between the 2000 and 2009 Acts, one could say there’s an institutional formation in practice through the improved and clear structure of taxi associations and related custodians, administrative processes and formal market entry controls. Jackie Walters from UJ, highlights that in 2006 the Taxi Recapitalisation programme was introduced and it begin a formal process of scrapping and aimed to “[replace] old and unroadworthy taxi vehicles with new vehicles that had to meet new national standards for the conveyance of passengers”. A few years before writing that piece, he also had a broader expectation about the industry’s recapitalisation programme:

The taxi recap programme aims to fundamentally change the way the industry is operating. It will also result in its formalization through minimum wages, maximum hours of work and tax compliance requirements.

On the ground, the political structure of taxi associations, between the black-market and formal administration only matured in 2008. Leading up to this point, conflicts were severe as policy conflicted with practice and the transitions thereof. Once the 2009 Act emerged, there was a degree of order, but the conflicts continue because the policies require even deeper specification: closer to the practical needs and experiences. However, in 2007 the Public Transport Strategy practically advocated for the introduction of Bus Rapid Transport systems without the account of the minibus taxi and metered taxi industries (see Zapiro’s sketch here). Which appeared to be an opportunistic policy, premature but crucial for the evolution and recognition of the taxi industry. Ghalieb Dawood put the issue in perspective in 2017 age he highlighted that the costs of running the BRT programmes were too high, and not including the taxi industry in a sustainable fashion was a mistake.

There was no policy to reflect the need for hybridity after the 2010 World Cup (mixing bus transport with minibus taxi operations)– until the NLTA was amended initially; or the structure of operating companies (taxi associations forming companies to run bus transport); and the possibility of expanding their reach beyond the taxi business (taxi associations forming investment companies with the assets they own). Does transport policy empower fair and competitive entrepreneurship or does it advocate for the development of the disenfranchised but Empowered Native? I strongly believe in entrepreneurial transport policies that keep ahead of the tide. Will it keep up with the developments in practice? If current policies fall behind the present complexities, are practitioners not responsible to assist in the process of correcting the market; or are we going to hide behind the policy process far from the tactile consequences of the policy decision we take (or do not take)?

“The difference between the ‘ideal’ and the ‘actual’ is of course a measure of the misalignment currently occurring between your business and its customers.”

—John Gattrona

The transport industry is about customers, goods and people alike, each one changes over time. While businesses can follow these changes with little latency, policies however wait for the political system to deploy an interpretation of the issues. There will be those who question based on the existing policy environment, and then there will be those who charter beyond the edges of each sheet. Either way, the tension between the ideal and the practical are a natural part of regulation. In Tumi from the Volume as Stogie T’s preset album “Music from My Good Eye” he says most of us want: “the juice from the fruits or the roots that drive them.” Public policies in the transport sector could practically nourish the root problems and give society a new route to branch on–is that ideal?

Thank you for reading. A few other pieces in the pipeline, hopefully this new format is as insightful as it is tense.

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