DURBAN'S NEW BUS SERVICE DOESN'T END TRANSPORT CHALLENGES

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SUBJECT: DURBAN'S NEW BUS SERVICE DOESN'T END TRANSPORT CHALLENGES

REF: DURBAN 37

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1. (U) Summary. Durban commuters have been scrambling for
transport ever since the Remant Alton bus service provider
closed down at the end of June. Remant Alton has been beset by
financial, labor and managerial problems since it began
operation. New bus service provider Tansnat Africa has been
appointed by the City of Durban to take over bus operations;
however, former Remant Alton bus drivers and local bus operators
are protesting this decision. Left unresolved, these issues may
put a crimp in Durban's plans to upgrade its public
transportation system ahead of the 2010 FIFA World Cup (FWC).
End Summary.

Background: Operation Beset By Problems


2. (U) Remant Alton took over Durban's bus service, Durban
Transport, in 2003 in a privatization deal that was publicly
heralded by Mayor Obed Mlaba and city management as a black
empowerment model. The operator has since received more than R1
billion ($123.5 million) in government transport subsidies that
keep prices low for students and senior citizens. Despite this
government aid, Remant Alton's service has been crippled by many
problems. In April 2006, a fire destroyed 69 of its buses;
arson by disgruntled bus drivers was suspected as the cause, but
authorities never charged anyone. In May 2008, the service
stopped for two days when workers went on strike to demand a pay
increase.


3. (U) Amid severe cash flow problems in September 2008, the
eThekwini Municipality (of which Durban is a part) breathed new
life into Remant Alton by agreeing to buy its bus fleet for more
than R404 million ($49.9 million) and lease it back to Remant
Alton to continue running the bus service on behalf of the
municipality. This buy-back agreement sparked a six-week long
strike by bus drivers, who also demanded to be employed by the
municipality (Note: According to a private sector contact, the
drivers used to be municipal employees and received full buy-out
packages in the 2003 privatization, so it is understandable why
Durban authorities did not entertain this request. End note.).
The strike ended with an agreement to involve workers in the
planned restructuring of the city's contract and dividing it
into smaller routes for contracting out to smaller operators.
In January 2009, commuters were left stranded when bus drivers
protested the possible shut down of Remant Alton.


4. (U) In March 2009, Remant Alton suspended its services and
declared itself technically insolvent. Durban's executive
committee threatened to sue Remant Alton for breach of contract.
Within two weeks, however, the bus service was up and running
again after the city forgave penalties for transgressions of
minimum services as set out in the original contract and lease
costs of buses that had not been running during 2008's prolonged
strike action. In May of this year, commuters were stranded yet
again when disgruntled drivers went on strike to protest their
poor working conditions. This came a month after a month-long
shutdown when Remant Alton said it could not operate because it
had not received its monthly government subsidies.


5. (U) In June of this year, local media reported that the
National Prosecuting Authority's Asset Forfeiture Unit and
Durban Organized Crime Unit had opened a case to investigate
allegations of widespread irregularities in the takeover and
running of Durban Transport by Remant Alton. Also in June, a
private investigator accused CEO of Remant Alton Jay Singh of
fraud amounting to more than R1 billion ($123 million). Singh
was also accused of mismanaging a multi-million rand eThekwini
housing project involving more than 2,500 houses.


6. (U) In addressing allegations of wrongful conduct arising
from the 2003 takeover of the city's bus service, Remant Alton
recently disclosed that in order to finance the original
purchase of Durban Transport, it had borrowed funds from
Standard Bank using buses bought from the city as collateral.
Neither how much money Remant Alton borrowed nor the exact
amount it paid to the city for the purchase of the buses has
been disclosed. It is not clear whether this loan and the
interest charges were repaid at the time the city repurchased
assets from Remant Alton last year.


7. (U) Remant Alton finally closed shop on June 30 when it
stopped receiving government subsidies amounting to R8 million
($988,000). One thousand five hundred employees lost their jobs
and 100,000 daily commuters were left to find alternate
transport.
New Bus Service


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8. (U) On July 9 MEC (Member of Executive Council - a
provincial `minister') for Transport, Community Safety and
Liaison Bheki Cele and Durban Mayor Obed Mlaba announced that
Tansnat Africa, which runs a fleet of 800 buses across South
Africa, would take over the Durban Transport bus contract until
it expires at the end of September 2010. Mayor Mlaba said that
Tansnat was `the right company to take over' and will start
operating on July 20. Tansnat Africa CEO Mike Jesserman told
the media that his company will bring substantial changes. For
example, the inner-city bus service will be run by taxi
operators, and the bus fleet will be downsized from 650 to about
450 buses to reduce fuel and salary costs. Tansnat Africa also
operates Ikhwezi Bus Service in Richards Bay and Empangeni,
Sizanani maZulu in Pietermaritzburg, Imondlo Bus Service in
Vryheid, and two luxury travel coach lines, Express Liners and
Gauteng Coaches, which run between Durban and Johannesburg.

Unclear Role for Taxi Drivers


9. (U) Although Jesserman and KZN Transport Alliance Chairman
Eugene Hadebe have indicated that taxi operators will manage
about 40 percent of the new bus operation, eThekwini
Municipality Deputy Head of Public Transport Erik Moller told
local media that the operation being considered for taxis was
`nowhere close to 40 percent of the total. I am not aware of
taxi operators getting any such stake.' It is most likely that
the People Mover and Mynah bus services could be given to taxi
operators, which would translate to operating fewer than 70
buses, compared to the 450 buses to be operated by Tansnat
Africa.


10. (U) South Beach Taxi Association Chairman Yusuf Khaliva said
to local press that he could not comment on the bus operation
plans because the association was also unclear about how it
would operate in the new system. Khaliva said the association
was in preliminary discussions with the city and still needed
City Manager Mike Sutcliffe to explain how its running of the
buses in central Durban would work. "We need Sutcliffe to
explain how the operations will work, whether we will bring in
our own drivers or what," he commented.
Local Bus Operators Snubbed


11. (U) Several Durban-based bus operators are upset that the
eThekwini Municipality selected an out-of-town company to take
over the Durban Transport bus service. Established local
operators reported to local media that the lack of consultation
was unfair, especially as they have stepped in to assist the
city whenever Remant Alton ran into trouble. South Coast Bus
Service Managing Director Pickey Dass said it was "a slap in the
face" that his company, which had been shortlisted for the
Durban Transport contract when the service was privatized in
2003, was not considered to run the interim contract. Mohamed
Asmal, managing director of Durban-based Olympic Bus Lines said,
`One would have expected the eThekwini Municipality to have
given the local ratepayers some preference.' In response to
this criticism, a provincial cabinet task team, Mayor Mlaba, and
the city council released a joint statement explaining that
`emergency provisions of the existing contract were used for the
appointment by the province of an alternative operator for the
Durban transport service.'


12. (U) Tansnat was not able to begin service as planned on July
20 due to a court interdict brought by local bus operators,
preventing the transfer of the Remant Alton contract to Tansnat
Africa. Local media reported that local bus operators
questioned the process the eThekwini Municipality followed in
awarding the contract to Tansnat. On July 21, the
Pietermaritzburg High Court ruled that the case would be
postponed until October 26 and that Tansnat Africa has authority
to run Durban's bus service in the meantime. MEC Cele reported
to a national radio program that bus service to Durban is
scheduled to resume on July 27.
What Becomes of Remant Alton Bus Drivers?


13. (U) When Remant Alton closed shop, it fired all of its
employees, but the bus drivers filed a stop order to prevent the
company from doing so. The request was dismissed in the
Johannesburg Labor Court, and now the drivers are demanding that
Tansnat Africa be required to hire all of them even thought the
contract signed by the new company only requires it to source 80
percent of its staff requirements from the Remant Alton staff.
Transport Allied Workers' Union of South Africa General
Secretary Zack Mankge said they were disappointed. "As it
stands now, the new operator has said it will employ about 80
percent of the workers from Remant Alton, but that still means
that between 200 and 300 workers will be on the streets - and

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that is unfair." Mduduzi Sibiya who has worked for Remant Alton
for six years, reported to local press that the drivers were
distressed and angry. "I am the breadwinner and I have five
children to support. I have a bond [mortgage] on my house and a
car and next month, I do not know how I am going to make the
payments. It was wrong for the municipality to appoint a new
operator without consulting us."


14. (U) The situation has come to a head, and there was a tense
three-hour stand-off between police and thousands of protesters
outside the Durban City Hall on July 16 as marchers demanded the
appointment of a commission of inquiry to investigate the
collapse of Remant Alton. The former Remant Alton bus drivers
have threatened that no buses will run in the city without them.
City officials, however, said the law would take its course in
the event of any disruptions of the bus service.


15. (U) Opposition parties expressed sympathy for the
protesters, saying the protest should serve as a warning to the
city that decisions should not be imposed on people without
consultation. Inkatha Freedom Party eThekwini deputy secretary
Joshua Mazibuko said in a press release, `This should be a
wake-up call to the municipality because there is not just one
group involved here, meaning the concerns are widespread.'
Democratic Alliance (DA) Provincial Deputy Leader Sizwe Mchunu
echoed Mazibuko's sentiments to local media, saying the DA had
warned the city seven years ago that such a thing would happen
if they did not put the public's needs first. `People are
saying they are tired of the poor service they are receiving
from the city. They are tired of not being consulted on
decisions and being victimized.'

Comment


16. (U) Durban's bus crisis poses a serious threat to the city's
ambitious plans to improve its transportation system ahead of
the 2010 FWC. As reported in Reftel, Durban plans to establish
a central public transport hub that will, in great part, depend
on reliable bus service. Taxi drivers who have a reputation for
reckless driving also pose safety concerns. Until these issues
are resolved, the city will likely experience further strikes
and protests, which will delay transportation initiatives and
may embarrass Durban if they occur during 2010 FWC. Similar
labor issues and taxi protests have occurred in other 2010 host
cities attempting to implement new bus-rapid-transit systems.
DERDERIANJ