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IOLProperty - South African Property For Sale
Tuesday Oct 23, 2012

Extra costs loom as Durban looks to run bus service

eThekwini ratepayers may have to pick up the annual R472 million tab for running the Durban Transport bus service if the city takes over its full operations.

This comes after the municipality's decision to take over management of uShaka Marine World despite concerns that it could become a financial liability because the city lacked expertise to run the facility.

An assessment by the city's transport unit reveals that financial sustainability remained a concern should the city take over running of the bus service.

The biggest concern is that it stands to lose a multimillion-rand public transport operations grant from the KwaZulu-Natal Transport Department should it run the service internally.

The subsidy cannot be assured until the National Treasury agrees to change the Division of Revenue Act to include municipalities. If the subsidy is retained, the shortfall for Durban Transport would decrease to R158m.

The city would also have to pay millions in additional salaries because it would have to increase its staff complement from 760 to about 860.

Coupled with the city-subsidised International Convention Centre and Moses Mabhida stadium, uShaka has racked up multimillion-rand losses. Last year it was predicted that ratepayers would have to fork out R100m to fund these entities. Officials have said they were not intended to make a profit, but had major economic and tourism benefits for the province.

Local economist Bonke Dumisa supported the proposal to run the bus service internally, saying the company that had been awarded the tender had not saved the city money.

"Taking over the operations of the bus service is a different story compared to uShaka because running a theme park calls for certain expertise which the city can easily outsource. When you have the city running uShaka you risk getting sloppy service often associated with municipal workers," he said.

Ratepayers were already picking up extra costs for the ICC, uShaka and Moses Mabhida, and if they were to be privatised they would probably have to pay out even more.

MF councillor Patrick Pillay argued that the extra costs involved in the bus service would effectively leave ratepayers with a bigger hole in their pockets.

"If we were to consider taking over the bus service we must make certain we do not lose the government subsidy," he said.

DA caucus leader Tex Collins said the city should have taken a decision on all municipal entities years ago. He said uShaka should not be brought in-house because it required specialised skills to operate and the ICC should be run as a separate entity and should not have to be bailed out by the city.

"The buses have been operating illegally since 2009 and the city has taken for ever to fix this issue. Ratepayers deserve a great deal of answers," he said.

Municipal spokesman Thabo Mofokeng would not comment.

Earlier this year, the council resolved that the municipality would take over the full operation of the bus company. The city could either operate Durban Transport as a council unit or as a trading service. The municipality could also establish a municipal entity in terms of the Local Government Municipal Systems Act to run the service.

Nine years ago Durban Transport was sold to Remant (Pty) Ltd and Alton Coach Africa Consortium owned by Durban businessman Jay Singh for R70 million.

Ratepayers were promised that an empowerment deal would save R40m a year, but instead the service was riddled with problems.

In August 2008, the municipality bought back the buses and equipment for R405m but allowed Remant Alton to run the service.

In 2009 the municipality terminated the company's contract a year early.

Tansnat Africa was appointed in August 2009 to run a reduced service. However, the contract was declared illegal in December 2009. Several local operators complained that Tansnat had been given the contract without the matter's going to tender.

The city pays Tansnat Africa about R136m a month in subsidy.

The Mercury

 
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