Department of Transport
| moving south africa |
| SYSTEM OBSTACLES |
Department of Transport |
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7.4 Findings: System Obstacles
The final category of key strategic challenges identified in Phase 2 consists of obstacles to the system’s performance, principally shortfalls in skilled human capacity and issues of long-term financial sustainability. Without either of these factors, the system will never be able to deliver customer satisfaction over time, nor will it have the basis from which to innovate and upgrade its performance. As a result, Moving South Africa examined the issues pertaining to both. The term ‘sustainability’ refers to the ability of a firm or entity to sustain itself in business – for both capital and operations – through its own means, without outside subsidy or support.
7.4.1 Findings: Human Capacity
Moving South Africa found evidence of substantial capacity gaps in the current system. These gaps are a natural outgrowth of the tension between a need for new skills resulting from new priorities and a new constitution with the results of a system engineered to support previous national objectives. Thus, it is not surprising to find that in 1995, South Africa rated worst of 46 countries in a survey of human resource development practices. Whereas the pre-transition economy stressed labour creation in transport jobs, the new economy that is competing globally needs transport workers with sufficient skills to create value in their work. This represents a substantial shift, and one which is embraced unevenly across the sector. Transnet, for instance, spends over 4.5% of remuneration on training, but many private bus and freight competitors – particularly the smaller ones – spend less than 1% of remuneration on training.
In addition to a lack of personnel with value creation skills, two other gaps emerged. First, South Africa lags other economies in the use of advanced logistics, and this emanates, at least in part, from a shortage of adequately skilled logisticians. As the manufacturing and retail economy grow in sophistication and move towards better precision and greater flexibility in supply chains, this skill gap will constrain the South African economy and its ability to compete globally.
Perhaps the most glaring skills gap, however, derives from the new constitutional dispensation. With nine provinces holding increasing responsibility for transport service delivery, the capacity within government becomes a critical potential obstacle for transport to meet the national and customer objectives. While all provinces are experiencing technical and administrative skills shortages and high turnover, the problem is most salient in the newly established provinces, and the least amount of training occurs in the provinces that need it the most. Figure 55 compares the human resources staffing vacancies and training of Gauteng, KwaZulu-Natal, and Northern Cape provinces[21].
Figure 55: Capacity Challenges
In some provinces the situation is even more acute: the budget for Eastern Cape transport only allows enough money to cover administrative personnel, leaving no funds for road construction and maintenance. Beyond the numbers and the training, the most important aspect are the skills requirements themselves, which are shifting rapidly as the role of government in transport evolves. As provinces gain responsibilities, new skills are needed in the realm of land use/infrastructure planning, contract design and management, monitoring and enforcement, and multi-modal passenger system research, design, and support. These skills are also needed at the national level to help create and propagate the vision and make the critical scope and density decisions.
Human Capacity: Key Strategic Challenges
The challenge for any strategy is to enable the system to create capacity for new roles in both the public and private sector, address the skills gap for existing transport managers and workers, and align the providers of training with the changing needs of the sector. The further challenge is to create new capacity in a way that reinforces the shared transport vision that will be needed for a system to be effective, and to do it within the confines of the constitutional devolution of authority to the provinces.
7.4.2 Findings: Financial Sustainability
The problem of financial sustainability, although presented last in this report, is one of the most serious issues facing the transport system over the long run. The concern for sustainability arises from the goal of meeting customer goals and national objectives over time; if the system cannot support itself, customers will invariably be dissatisfied. There are many reasons why sustainability matters. First, and foremost, it is important for meeting customer needs for cost, levels of service, capacity, and modal choice. Second, sustainability is a necessary condition for upgrading, though it is not sufficient unto itself. Third, transport is a long-term industry – especially reinvestment in infrastructure, which requires advance planning and funding availability. And fourth, loss of one industry could destabilise other parts of the system, creating undesirable effects on customers, system costs, and service levels.
Many other sections of this report have referred to sections or subsections of the industry that appear to be unsustainable; indeed, only airports and international airlines appear likely to be able to guarantee long run sustainability. MSA has already detailed:
The R3.3 billion annual road underfunding,
- The capital reinvestment below required levels for almost all modes, detailed in Figure 56 below,
- A fleet which, on average, is operating above 80% of useful economic life,
- Externality costs not currently borne by operators who incur them, and
- Cross-subsidisation within some entities that perpetuates poor operating practices at otherwise money-losing operations
Figure 56: Estimated Capital Spending as a Percentage of Long-term Capital Requirements
Taken together, all of these data suggest a severe inability for the system to meet the needs of customers in the coming years if nothing is done to address the issue. Furthermore, these findings suggest a severe resource constraint or a system that simply costs too much, or both.
Financial Sustainability: Key Strategic Challenges
Among the causes of the sustainability problem, four stand out: insufficient financing; escalating externality costs; low skill levels to address the problems; and failures in feedback mechanisms. The challenges, therefore, entail addressing these causes systematically, as well as making choices and setting priorities.
One of the most important challenges to address is that of feedback mechanisms, those elements like pricing and capacity planning that either signal value to customers or enable the system to expand in response to increases in demand. Feedback mechanisms are the single most critical way in which a dynamic system can regulate and upgrade itself – only if clear signals are sent and received can entities adjust their services to improve customer satisfaction, raise quality, or, if necessary, reduce service.
Moving South Africa identified five types of feedback loops (see Figure 57) that were currently, in some fashion, malfunctioning:
Figure 57: Feedback Loops
Desired outcome of feedback Examples of broken feedback links 1. Add capacity in response to demand growth International airline capacity restricted by bilateral agreements Commuter rail line extensions not funded even when demand exists 2. Effectively use existing system capacity No incentive to travel off-peak on buses or commuter rail Congestion is blunt and slow feedback mechanism for car users 3. Improve provider efficiency Historic bus permits did not provide feedback to improve operating inefficiencies Cross-funding in Transnet reduces urgency to improve operating efficiencies 4. Offer types and levels of service demanded by customers Public transport service terms (e.g. quality, routing, price) are dictated by government, not the customers Taxi industry dependent on organising cartels rather than meeting customer demands 5. Pricing that signals actual value Externality costs not fully borne by the users that create them Road use cost not fully or directly recovered in pricing Rail general freight not pricing to full long-term cost Thus, a paramount challenge for the strategy is to effectively repair the feedback loops so that the system can restore proper signaling. More than any other change, this is the most essential, for it enables the transport system to modify itself over time in response to conditions that will inevitably change between now and 2020.
21 Northern Cape numbers appear to be higher because vacancies represent slots missing from a small base (e.g. 4 technicians posts are all empty)
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