IRT business model slammed

By Time of article published Aug 11, 2010

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By Babalo Ndenze

Metro Writer

Former taxi operators and owners could soon be the proud owners of the city's state-of-the-art MyCiTi bus fleet, valued at over R100-million, which the city plans to sell to a bank which will, in turn, lease them to the operators.

But this plan to revolutionise the public transport sector and the taxi industry comes amid concerns that the entire Integrated Rapid Transit (IRT) system could be hit by major financial difficulties. The IRT business model has come under severe criticism from the Chamber of Commerce and some councillors.

The city has already bought 43 vehicles, which were used during the World Cup. These are owned by the city, which has already trained 130 drivers, with three-quarters coming from within the taxi industry and the rest recruited through an agency. The city envisages buying more vehicles as part of the first phase of the IRT roll-out.

"The favoured approach involves selling the vehicles to a financial institution which, in turn, leases the vehicles to the operators. The city invests the proceeds of its sale with the financial institution and pays the vehicle operators out of the proceeds of the investment, to enable the vehicle operators to lease the vehicles and so provide the public transport service," read a city transport report.

According to the city's business plan, the vehicle operator will lease the vehicles from the bank in terms of a 12-year contract.

"Vehicles meeting certain criteria get transferred to the operator at the end of the lease, so as to encourage a high level of maintenance" said the report.

The city had initially signed a contract with TransPeninsula, a company formed by inner-city taxi associations, to provide vehicle operator services until October.

Peninsula Holdings, which has a membership of around 150 taxi operators, was created to allow the taxi industry access to the formal business world and has a 77 percent shareholding in Transpeninsula Investments.

TransPeninsula chief executive Igshaan Lucas said the plan to lease the buses was still news to him.

Cape Chamber of Commerce director Albert Schuitmaker said he has written to the council to express the chamber's concern at the model chosen by the city to run the public transport service, as well as the costs and potential for major financial losses.

Schuitmaker said the chamber strongly supports the initiative taken by the city to create an integrated public transport service, but it did not agree with the approach.

"Our main concern is the decision to create a municipal entity to run the new transport routes and then to contract four other companies to run the buses, run the fares and ticketing system, run the fleet management system, and yet another company to maintain the bus stops and stations, as well as provide the cashiers and customer service agents.

"This would effectively break down the service into five separate parts, with no guarantee that the different contracted companies will be able to work together," said Schuitmaker.

Maddie Mazaza, the city's acting executive director responsible for the IRT, said the entire business plan was up for public comment and the council would consider the submissions in October.

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