264 | Competition Commission recommendations for public transport: timely, useful and out of date

It has been almost three years since the Market Inquiry on Land Passenger Transport started, and between then and now an economic crisis supersedes its ideological stimuli. 

The inquiry focused on price setting and regulation, route allocation, subsidy allocation, transport planning and transformation. 

Reports on their findings have been discussed, with a focus on the “equity issue” in terms of subsidising the minibus taxi industry as a dominant public transport mode. 

Modal integration was another hot topic with an emphasis on the relationship between Metrorail and the Gautrain, where subsidies per passenger are reported as higher for the Gautrain and route alignment and parallelism are highlighted.

In the same breath, similar issues emerged in the bus transport market with aging contracts, lack of small bus operator participation and the need for deeper restructuring of rural public transport subsidies. 

There were also important recommendations about the regulation of ride-hailing or e-hailing platforms such that the metered taxi market would be liberalised in order for it to be competitive, whilst these network companies (Uber, Bolt etc.) were not subject to operating permit processes and stricter screening. 

At the heart of the issues raised was a lack of policy decision making in three forms: subsidy allocations, institutional reform, and economic regulation. This implies that the National Department of Transport held on to pre-94 subsidy norms, while reacting to post-94 policy issues through administratively regulating the minibus taxi industry. However, none of these efforts truly gripped the long-run quagmire we would inherit today. 

September 18 2018, POLICY BRIEF: Submission to the Competition Commission in 2018. A few weeks ago I had the privilege to make a submission to the Competition Commission of South Africa. The main objective behind the submission was to contribute to the discussion around the Land Based Public Passenger Transport Market. The submission covered a number of thematic areas, one of which I excluded which discusses the importance and role of the private car. It’s not a clear thought as yet, but it shall be in the medium term.

At the heart of the issues raised was a lack of policy decision making in three forms: subsidy allocations, institutional reform, and economic regulation. This implies that the National Department of Transport held on to pre-94 subsidy norms, while reacting to post-94 policy issues through administratively regulating the minibus taxi industry. However, none of these efforts truly gripped the long-run quagmire we would inherit today. 

Nothing new, but a more comprehensive analysis

None of the Commission’s findings were particularly new. The inequality in public transport subsidies was highlighted and estimated to cost little over R50bn per year in 2014. Since 2008 already, it was well known that transport policy and planning in South Africa has had each mode “dealt with through a “silo” approach”. Thus limited modal integration, and even worse, a lack of consideration for rural areas, intermediary cities and small towns. 

The Commission had a working paper on this issue published in 2016, which revealed two key points. First, disruptive technologies would have significant impact on how competition is structured in the transportation market. Second, the Commission contended that advocacy to sensitise the technology platforms and regulators about the “potential competition concerns” and “the benefits of designing pro-competitive” regulatory environments, would serve both sides of the markets well. 

Even with regard to institutional arrangements, in 2005, the municipal transport authority discourse was on the table at the Southern African Transport Conference; in 2014/15 the Fiscal Financial Commission (Chapter 8) made clear proposals around the devolution of transport functions, with an emphasis on enhancing the delivery of transport services—the South African Local Government Association (SALGA) made a similar but more detailed offering around the same time. 

The Commission highlighted that the lack of a subsidy policy, guidelines for devolution, and poor regulatory frameworks are at the heart of the inefficiencies in the passenger transport market—findings that an internal literature review would have reinforced. 

There are other pieces of evidence which preceded the Commission’s inquiry, making similar findings, but we must appreciate the comprehensive coverage and effort by the Commission. However, although this report reinforces key policy agenda issues in passenger transport, it does bring to question what the National Department of Transport has been preoccupied with. 

Was the National Department of Transport complacent? 

The Commission’s report in my view was a valuable contribution to the NDoT’s mandate, but it raises questions about the extent to which the NDoT engages and consolidates market issues, data, and policy reforms internally and for the public to consume, analyse or model with. 

Many of these issues had surfaced, perhaps in disbelief, in the updated White Paper on National Transport Policy in 2017, after which three policy developments started to emerge. 

The first is the subsidy policy document which has been in circulation for the past few weeks, and will be discussed at the Transport Special Interest Group this week (11th May 2021). Even with the policy promulgated, it may need to navigate through other internal and parliamentary processes prior to turning into a tangible and allocatable budget. 

Secondly, the emergence of the Single Transport Economic Regulator or STER, which will serve as the competition and market authority specifically for the transportation sector (passenger and freight). 

Finally, these two programmes require policies related to the Economic Regulation of Transport which represent the findings made by the Competition Commission to be translated into regulatory models with appropriate parameters. In other words, turning the words into actionable themes with relevant instruments to intervene. 

These ambitious projects, according to the Estimates of National Expenditure, seem to be on the horizon for implementation within the next 5 years. There is no time to run an audit of what the NDoT has done post-94 to date, we need to press forward and shrink the timelines for the above mentioned reforms and their implementation.

The recommendations may already be out of date 

Both the Competition Commission and the NDoT have in my view made two fatal mistakes: assuming that technology platforms will be limited to metered taxis and <9 passenger vehicles. Whereas, the probability that the minibus taxi industry will go digital from a service offering perspective is increasing as fast as technology develops. 

Furthermore, the technology platforms will ripple into various parts of the transportation market: operators, users, financiers, industries and institutions. Thus the main concern in this regard is how forward looking and entrepreneurial are the policy frameworks going to be? 

The other “glitch in the matrix” is the perpetual exclusion of non-motorised transport in the public passenger transport environment. This represents both the lack of recognition that the sidewalks, bikeways and safe environments at human scale are crucial for a competitive public transport ecosystem. 

They require investments in local network assets, changes in land-use incentives, traffic calming and route planning in a way that enhances health and commerce alike. Especially in the face of online retail, Mobility as a Service, bike sharing, and new transport financing instruments fuelled by digital technologies (and green financing instruments). 

Then again, the big conversation around electrification (mentioned in the previous piece) will potentially usher in a new array of development alternatives and competition trajectories. 

In order for us to confront the “equity issues” of the past 30+ years, we must gear toward the future, that is to leapfrog, or to moons hoot—fast tracking the paper work, and integrating systems. No ideological conversation can shortcut the hard work that faces this generation, for the ones to come. 

Thank you for reading. Below is a copy of my submission.

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