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Why market disrupter Uber creates a crisis for government

Helen Zille gives citizens ‘a peek behind the curtains of government’.

Government is a complex beast.  It can only do what the law specifically allows it to do, not what people (or the Premier) think it should do. Decision-making requires long processes, by numerous people in different departments, governed by a whole range of laws, regulations and by-laws.  

If you are still reading, after that boring paragraph, stay with it. This is the first in a series of newsletters I plan to write, giving citizens a peek behind the curtains of government. You will soon understand why Yes Minister became one of the most popular TV series ever.

This first issue deals with the controversy that exploded in Cape Town last week about Uber, the e-hailing cab service. For the uninitiated, Uber is a smartphone application that is revolutionising the metered-taxi industry. It enables consumers to request a trip, locates them, and refers them to the nearest available Uber partner driver. It has proved to be a ‘cool’, safe, cheap and efficient service. Young people love it, and many parents (including me) sleep better at night knowing that their kids will ‘Uber home’ rather than take risks after a night out.

So it came as a shock to discover that over 200 Uber taxis have been impounded by the traffic police since the beginning of the year. 

Last week, public frustration exploded on Twitter. Within hours, #CTneedsUber was trending and 14 000 people had signed an online petition to legalise them.

But here’s the thing: Uber’s e-hailing service “does not fall into any of the categories of the National Land Transport Act”, as an official explained to me this week. It is also not provided for in the Integrated Transport Plan. And any process to regularise the e-hailing service must follow the requirements of the Promotion of Administrative Justice Act.  Furthermore, just last week, a court case in the United States concluded that Uber drivers were not self-employed, but employees of the Uber company, a decision with far reaching legal implications.

In other words, Uber is a market disrupter.  It was unheard and unthought of when South Africa’s legal framework for public transport was put in place.

This situation creates a crisis for government. Officials must act within the law. But the law doesn’t envisage or cater for e-hailing services. The result is government paralysis. 

No wonder Business Day gave us a “red light” for not being “nimble” enough in dealing with Uber e-hailing. But a figurative “red light” is far easier to survive in government than a qualified audit from the Auditor General for “irregular and unauthorised expenditure”.

So time drags by while officials try to squeeze the new reality into the prevailing legislative framework, and the City prepares a by-law to legalise and regulate e-hailing. The solution currently on the table is to license Uber taxis in terms of the clauses covering metered taxis, while providing certain exemptions.

But why insist on licences at all, several people have asked? Surely, consumer choice should be regulated by the market? In any event, they say, Uber is self-regulating through a star-rating system.

When it comes to public transport operators, it is not so simple. Government cannot evade responsibility for safety, which includes roadworthiness, passenger insurance and third parties. If, for example, the vehicle does not have a valid operating licence, passengers cannot claim from the Road Accident Fund in the event of a crash.

Moreover, regulation of the taxi industry in South Africa has proved to be one of the examples of market failure.  Competition is more often resolved by violence than consumer choice. There have been 15 murders (and many more injuries) in the past year relating to taxi conflicts in an overtraded industry. And the current situation of overtrading can only be resolved by market displacement, which usually results in escalating violence. Furthermore, the law prohibits the issuing of additional licences in an overtraded market.

When I pointed this out last week, it only increased the controversy.  “Do you think my Uber driver in his Mercedes is going to shoot someone?”, an uber-angry user asked. No, I do not think so, but how do you know that he won’t become a target? 

This is not far-fetched. Just last month in France, President Francois Hollande called for a ban on the Uber app, following violent resistance against the service in various parts of the country. Hollande is a socialist and believes in market manipulation. We do not. But this does not exempt us from the legal requirement to prevent overtrading and take into account the comments of current licence holders before we issue new ones.

And it is not only socialist governments that have a problem with Uber. Earlier this year, reports surfaced that Spain and Germany had prevented Uber from offering unlicenced services.

What a minefield! Once I had investigated, I could understand why officials are treading so warily. They know they will be held responsible if something goes wrong.

On the other hand, I can also understand the public’s fury at the red tape and inconvenience over our failure to regularise e-hailing, not to mention the impact this has on jobs. It was hardly surprising that Alan Winde, the Provincial Minister of Economic Development, signed the protest petition, while his colleague, Minister Donald Grant, Provincial Minister of Transport, defended his officials. These are some of the inevitable contradictions and conflicts that happen in government.

Meanwhile, we are all working together on a way forward. On Thursday 9 July, there will be a meeting of the Provincial Regulating Entity, where all the verified Uber licence applications supported by the City will be considered. Those who gave false addresses, or other deficient information, will be rejected.

The City has also started the process of compiling a by-law to create a legal framework for the e-hailing industry, while the National Government has started the process of amending Section 66 of the National Land Transport Act, to make e-hailing taxis a sub-category of metered taxis.

The vigorous public debate has been helpful, and brought the matter to my attention. This is the way open, responsive government functions. And it is the way that, I hope, we can become more “nimble” and innovative when facing market disruptions in the future.

This blog was first published here in ‘Inside Government’ – a weekly newsletter written by Premier Helen Zille.

COMMENTS   7

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Interesting discourse on Uber, however this is where I have a problem because Taxi’s hardly fit into a metered environment, they are frequently uninsured and as such all passenger have to approach the Road Accident Fund for compensation. This to my mind is where the problem lies, make it mandatory that all vehicles on our roads have insurance be it comprehensive or balance of third party fire and theft and that all injuries and deaths are the responsibility of that taxi insurers responsibility. This should take away many claims against the RAF and put the responsibility where the problem lies and should not be just seen as a convenience for recovery. Also make it mandatory that all taxis undergo a roadworthy inspection/evaluation and if they fail the taxi should be given 14 days to repair all items through a reputable workshop and in the window period the taxi may not operate on the road. The Arrive Alive initiatives are an absolute waste of time and money/effort as they keep addressing the wrong issue of speed. The reality is that motorists have become lawless and reckless because they have no models to look to, the Blue Light brigade as the best examples of recklessness and the metro police and SAPS are absolutely atrocious examples for any new driver to emulate

Spot on ! Well stated Graham! And, do you think the taxi drivers or owners declare their cash for tax? I have a taxi pal, who laughs when I ask if he pays tax. They bank the cash and withdraw again…easy! We live in semi-anarchy!

Give Uber another chance.

a great read. The frustration from us uber-users is that the heavy handed approach adopted to the uber-providers seems imbalanced to the seemingly unregulated mini-bus taxi industry. I really doubt that my next uber will have smooth tyres, faulty brakes, possibly a fraudulent license in the drivers pocket, a wrench for the steering column, 3 of the normal 5 nuts holding each wheel on …. and yet there is this attempt to “over regulate” uber on the basis that if something does go wrong then I the uber user will come looking at the RAF.

So, to the uber guys …. please add an option to the application that allows me the uber user to either waiver or accept some private insurance that you can easily negotiate for my next fare.

Yes , I would agree with BD issue a straight red card. There may have a case for legislation but really get a life, the Uber app works wonders. I have used it in Jhb. Cut the red tape crap.
This only will allow for metered taxis to stir up a third force conspiracy and propaganda because they are such a backward deliverer.

“They know they will be held responsible if something goes wrong.” such an understatement. Have not seen any government politician take responsibility.

Why do we need to create more legislation we cannot enforce, surely the taxi industry is a prime example of this, unroadworthy vehicles’ total disregard for road rules.
Should there not be an effort to fix what is wrong first before we create another set of rules that can be and will be broken.
Uber obviously is effective and efficient, and we are going to make it less so by creating red tape!

As long as there is rampant corruption in a society, no amount of regulation will solve anything, regardless of how well meaning it is.

Tackle corruption and enforce the enforceable laws. Much of what ails us as a nation will be resolved, or at least give us a starting point from where we can positively regulate.

End of comments.

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