And Atlas Shrugged?
The public bus service in Durban has closed down, leaving
thousands of daily commuters with no way to get
to work or home again. It has closed because it is insolvent. How on earth did that happen?
The public bus service was run and operated by the city municipality from 1912 until 2007. It did receive subsidies from the
City, but these
were recovered from the Government and not from the ratepayers. In essence the public
transport system ran at a profit sufficient for it to replace its own vehicles as needed.
In 2007 the City Council decided that it was illegal for them to operate the public
transport under the new Constitution
- it had to be run and operated
privately by someone from the previously disadvantaged community.
The City Manager, Dr Mike Sutcliffe, then sold the public transport operation to a
private company named Remnant
Alton (Pty) Ltd for R70
million. This sum also included the route operating licenses and all the vehicles,
equipment and buildings in Alice
Street where the buses were garaged, serviced and repaired. So
far so good.
Remnant Alton
(Pty) Ltd immediately sold off the buses, (mostly new vehicles), one by one, to independent "owner-operators" contracted to Remnant Alton . An
owner-operator would drive their bus over allocated routes, collect the fares and use the
bus garage in Alice Street
as a facility for
maintaining the bus. They would also buy their spares and diesel from Remnant Alton (Pty) Ltd.
By the end of 2008 most of the buses were in such poor condition they were unsafe.
Broken down buses were the order of the day, and the service to commuters was a shambles.
Remnant Alton
(Pty) Ltd approached
the City Council
for help, and the City Council lent them R40 million at a very low interest rate to
restore the bus service. This was in March 2009.
At the beginning of April 2009 Remnant Alton (Pty) Ltd went into liquidation and
ceased all operations. The R40 million was "gone", so the City Council
seized the company. The 1500 "owner-operators" then took the Council - as the new owners of
the business - to the labour court, and won
their case.
The Council was ordered to compensate them with the same income they would have
received had the service continued operating until the end of their contracts. Naturally the
R40 million "loan" plus the award to the owner-operators comes out of
Council revenue, paid by the
ratepayers of Durban
.
Now the Council, who suddenly decide that it is NOT illegal to operate
the bus company, spends a fortune on buying new buses and restoring
the transport service to its former state. Nobody yet knows what this
has cost - the bills are still coming in. But suddenly there is a "whoops".
The Council can't run the buses, because it sold the licenses to operate over the
routes to Remnant Alton (Pty) Ltd. No problem. Just buy them back. Remnant Alton was willing to sell them back to the
council, and
the council was willing to buy them back. The only teensy weeny problem is that
Remnant Alton (Pty) Ltd had sold them to its Managing Director (an Indian - how did you know?)
and he wanted slightly more for
them than what Remnant Alton had originally paid. After tough negotiations the
council beat him down to a lower price and bought the
route licenses back for R45 million. Yes, that's right. R45 million.
OK. On the income side, the ratepayers scored R70 million when the bus company was
originally sold.
Now, on the debit side, they have an unrecoverable loan of R40 million, written
off Plus the cost of restoring the company to a good operating standard - say another R100
million Plus the cost of buying
the route licenses back - R45 million Plus the cost of
recompensing the owner-operators
- 1500 of them, for four months at R8000 per month each = R48 million (note: more than a
doctor earns)
So the total cost to ratepayers is R233 million less R70 million = R163 million.
Well, its a lot of money, but at least we will have a working bus service back.
Now here is the real kicker. The Council says it doesn't have the capacity to
operate the bus company, so it will be looking for a private company to operate it in the future -
and they have found the perfect candidate.
Yep. You guessed it. They are GIVING it away, lock, stock and barrel, completely FREE,
to.....
Wait for it......
Remnant Alton
(Pty) Ltd.
I kid you not.
Now, the Durban (Etekwini) Metro Council is overwhelmingly ANC, and they got VERY
upset when a Democratic
Alliance Councilor asked if they knew that the Managing Director of Remnant Alton
(Pty) Ltd had at some stage
in the past been found guilty of fraud, and served time for that offence?
The response? No, we didn't know that.
After more questions - Well, actually, the City Manager did know, but is was some
time ago, and the "gentleman" concerned had served his time and paid his
debt to society, so we didn't think it was important....
Meanwhile, the buses haven't begun running yet. Nobody has a clue when they will
operate again.
