SUNDAY TIMES - Let's get real about getting radical
Sunday Times Opinion By Andile Khumalo , 2017-04-16 00:00:00.0

Let's get real about getting radical

The definition of "radical economic transformation" is becoming a quandary for business, with fears that a "change in policy" at the Treasury is imminent, which is, in fact, code for "we are nervous that Zuma, under the guise of radical transformation, wants to access resources that were carefully guarded by minister Pravin Gordhan in the interest of fiscal consolidation and discipline".

I guess there is enough reason for people to fuss about the definition of "radical economic transformation", since the last guy who tried to define it lost his job.

In what was to become his final budget speech in his second coming as finance minister, Gordhan argued that "radical" was about going to the root cause of a problem and solving it at its core in order to derive sustainable outcomes.

Notwithstanding this rare display of solidarity with his boss, President Jacob Zuma still fired Gordhan, sparking a domino of repercussions that plunged the country into junk status, and calls for the president to step down.

None of the ANC's recently published draft policy documents offer a definition of "radical economic transformation".

Also, Bathabile Dlamini recently told us that she never considered this concept in her department's award of the R10-billion Sassa contract to CPS, as it is a new thing for the ANC that didn't exist back then. She will, however, consider it, but for now we should continue planting vegetables and sewing uniforms.

It is no wonder many are looking for a definition. So I figured the new finance minister could do with some pointers in defining and, more importantly, delivering this "radical economic transformation", and since his boss included "black economic empowerment" as one of his birthday wishes, perhaps a practical, low-hanging fruit that can be harvested straight after the Easter weekend, could help.

A few weeks ago, I was introduced to the intercity passenger market, through a chat by chance with CEO and owner of Africa People Mover (APM), Tumisang Kgaboesele.

This industry provides scheduled long-distance coach transport between major cities across South Africa, and 80% of the market is owned by three main players: Prasa-owned Autopax, the operator of the Translux and City to City brands; JSE-listed Unitrans, the operator of Greyhound and Citiliner; and privately owned Intercape.

In December 2014, APM, the first African operator with a national footprint, launched its service and immediately disrupted the market by introducing a high-quality service normally associated with premium brands such as Greyhound and Intercape but at prices normally associated with economy providers such as City to City and Eldo Coaches.

Today, APM transports 30000 passengers a month, has 14 sales offices across the country, employs more than 180 people and has its own independent depot facility.

In addition to managing the normal industry dynamics such as disputes over routes, industrial action, poor law enforcement and price wars, APM is also waging a fight for survival.

This is where the state can intervene and ensure a playing field that allows new black entrants to compete in the so-called "closed" industries. The government can radically transform the economy by analysing each industry and making very specific interventions in the levers utilised by established players to effectively keep out or make it near impossible for new black players to compete.

Let me illustrate.

APM, like the established players, has to pay a commission of about 10% to Shoprite Checkers for the sale of their tickets. They also have to pay 6% towards toll fees and another 6% to access Park Station, the biggest long-distance coach hub in South Africa.

There is a gaping opportunity to tackle the high cost of doing business in this industry, especially for new entrants. The government, through Prasa, Sanral and the licensing authorities, can take a decision to either discount, exempt or rebate black operators from payments due to them.

Park Station is an essential facility in the public-transport value chain. It is owned and managed by Prasa. The government, through Prasa, can quite easily use Park Station as a tool to effect economic transformation - just drop the 6% charge.

The same argument holds true for cost of the tolls administered by Sanral, an agency of the Department of Transport.

In relation to ticket commissions paid to Shoprite Checkers, government can negotiate a discount for black operators.

These interventions can be implemented for a limited period, say, for up to three years from start-up, or be capped to a certain revenue number, whichever comes first.

For those who want to give meaning to the term "radical economic transformation", here is your chance.

Khumalo is chief operating officer of MSG Afrika and presents "Power Business" on Power 98.7 at 6pm, Monday to Thursday.