Well, think again. Read this interesting letter, written by a practicing attorney in SA, and think again whether South Africa is somehow different from the rest of Africa. 

The City of Durban closed for business

Thousands of daily commuters can’t get to work in Durban, because the bus service has closed down. Why? It is insolvent. How on earth did that happen? Here’s the story:

The public bus service was run and operated by the city municipality from 1912 until 2007. It received subsidies from the City, but these were recovered from Government and not from the ratepayers. In essence, the public transport system made a profit big enough to replace its own vehicles as needed.

In 2007 the City Council decided it was illegal for it 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 his bus over an allocated route, collect 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 1,500 “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 came out of Council revenue, paid by the ratepayers of Durban.

Now the Council, who suddenly decided it was 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 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 – 1,500 of them – for four months at R8,000 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 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 Councillor asked if they knew 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 it 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. But, the citizens of Durban can take solace in learning the new street names as they walk to and from work, hoping they won’t step in the turds and filth, or get mugged. They may even see our city manager sweep by in his fancy luxury car, with a cavalcade of body guards, as he makes his way to his new luxury penthouse, valued at several million, at the Point Waterfront – smiling as he goes, because the area has been declared (by him) a rates-free zone until 2014.

Effectively, he is totally unaffected by this huge cock-up. He doesn’t even have to pay his share in his rates bill. Isn’t South Africa a wonderful place to live?

Tags: South Africa

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