DEEP DIVE | A broken permit system, broke drivers... but big bucks for Uber, City of Cape Town

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Uber drivers in the City of Cape Town battle licencing issues.
Uber drivers in the City of Cape Town battle licencing issues.
Omar Marques/SOPA Images/LightRocket
  • The operating licences system is broken, and drivers are going broke, but raking in big bucks in profit is US ride hailing giant Uber, while the world-class City of Cape Town scores millions in fines.
  • In this deep dive, Adiel Ismail turns a searchlight on the plight of women e-hailing drivers – arguably one of the most vulnerable groups of workers – who face demanding and dangerous bumps in the road to feed their families. 
  • In 2021, the City of Cape Town issued fines in excess of R13 million to e-hailing drivers for breaches of the operating permit by-laws, while not granting a single e-hailing operating licence amid a punishing three-year moratorium set to end in 2023.


One Uber driver. Two traffic officers. Ten minutes.

All Mary Muzengi wanted was to put food on the table for her family. But the cat-and-mouse game the aspiring social worker from Harare in Zimbabwe would have to endure for four years, always alert to the risk of traffic officials tailing her, is captured in a mere 10 minutes on a hot day in Cape Town.

It was a Sunday morning in January 2020. The sweltering heat was starting to beat down on Muzengi, but the warm breeze rushing in through her car’s window brought with it slight respite. It didn’t last long. Almost instantaneously, she started perspiring and her heart began thumping in her chest. Why? She was pulled over by traffic officials requesting her identity documents and driver’s licence. She had always dreaded what followed: they demanded the operating licence she must have in her possession to be on the road as an Uber driver.

"You are impounded," she recalls one of the officers telling her, throwing her hands up in the air. The 38-year-old was allowed to drop off the two British tourists who were in the car at a popular hotel nestled in the heart of the Cape Town’s vibrant Victoria & Alfred Waterfront. The courtyard of this glamorous escape was where she had the nightmarish experience of having her livelihood snatched from her.

She said:

"I went from being the driver to being a passenger in my own car when they drove it to the impound centre. I didn’t even have money to go home."

Muzengi was fearful, frustrated and flustered.

She is one of almost 80% of e-hailing drivers – according to an investigation by the Competition Commission – operating without a licence who are torn between the desperation to make a living, and the fear that each ride may result in their car being seized. The same City administrators and officials enforcing this law are also responsible for perennial delays in processing these licences. The outcome? R13 million in impoundment fines for the City of Cape Town, and likely millions more in revenue for e-hailing companies.

Currently, e-hailing drivers are granted operating licences as a sub-category of metered taxi services due to the absence of formal recognition of e-hailing services in the National Land Transport Act 5 of 2009 (NLTA).

The provision for e-hailing operators to be licensed as metered taxi operators followed a decision by the Transport Appeals Tribunal in which it confirmed e-hailing services were not in contravention of the NLTA. Therefore, the national Department of Transport issued a practice note in 2015 - two years after Uber’s entry into South Africa - to categorise e-hailing services under the metered taxi service umbrella as an interim measure while the National Land Transport Amendment Bill is still being considered in Parliament.

President Cyril Ramaphosa sent it back to Parliament in September 2021 after questioning its constitutionality. One of the submissions on the Act was from the City of Cape Town, which argued that Section 7 removed its power, ceding responsibility for concluding contracts to the province.

Provincial regulatory entities are responsible for issuing all operating licences. However, municipalities, as planning authorities, make recommendations or issue directives to the provincial regulatory entities to either grant or refuse the application based on the need for the service.

Speed bumps in the operating licence application process

When applying for a new operating licence, a detailed description of the area that will be serviced is required because metered taxi operations are generally radius or area-based services, and not route-based services.

The Competition Commission said in a report released in April 2021, after an inquiry into the public passenger transport market and e-hailing and metered taxi services, that, in the case of e-hailing services, "the radius is not adhered to because the app used by e-hailing operators allows operators to connect to the nearest passenger outside their municipal boundaries in violation of the licence conditions. Given their use of an app, the violation of the licence conditions by e-hailing operators is difficult to monitor by law enforcement officials".

E-hailing operators also face regulatory challenges with respect to operating licences because PREs are dogged by massive backlogs owing to the absence of directives by municipalities, limited capacity to develop integrated transport plans to inform the directives, general lack of capacity in planning authorities, and inadequate consultation with stakeholders.

As a result of the backlogs, e-hailing operators use their proof-of-application receipts while they wait for their licences. However, the Competition Commission report, also said: "The receipt or proof of application does not constitute an operating licence, implying that it is illegal to operate using proof of application."

Regardless of this, e-hailing companies accept applications from potential operators, who then provide a service illegally without operating licences. About 79% of e-hailing drivers do not have valid licences for the major cities in which they operate, evidence presented to the commission revealed.

'... they will have to suffer the consequences'

Although the extent of the illegal operations poses an enforcement challenge for authorities, e-hailing operators feel they are victims of the system and are specifically targeted by law enforcement officials, because impounding their vehicles adds more money to the City of Cape Town’s coffers.

"Any public transport operator transporting persons for reward must be in possession of an operating licence for the said vehicle," explained Lee van den Berg, the City’s manager for transport regulations.

"The operator must further ensure that all conditions, as stipulated on the operating licence, are complied with.

"The NLTA is very clear - if an operator operates without the required operating licence, then they will have to suffer the consequences for doing so," he stressed.

"Any vehicle found transporting passengers for reward without this operating licence will be impounded and fined by law enforcement officers and the vehicle taken to the City of Cape Town public transport pound."

City of Cape Town issues impound fines to the tune of R13 million

In 2021, a total of 1 418 e-hailing-type vehicles were impounded, said Merle Lourens, Cape Town traffic services' assistant chief in the transport enforcement unit.

There are two kinds of impound fees: operating without a valid operating licence and operating contrary to the conditions of an operating licence.

"Most of the impounds for the e-hailing-type vehicles were for operating without an operating licence," she added.

Impound transgression

The impound fee for operating without a valid operating licence is R7 000 for the first offence, R10 000 for the second offence, and R15 000 for the third and consecutive offences.

This means that at an average of R7 000 for 1 418 vehicles, the City of Cape Town issued impound fees to the value of at least R9 926 000.

A traffic fine of R2 500 is also issued for the transgression.

This means that at R2 500 for 1 418 vehicles, the City of Cape Town issued fines to the value of R3 545 000.

"Bear in mind that impound fees and traffic fines are at times reduced by the magistrate," Lourens noted.

"Is it more profitable to fine and impound than it is to generate revenue for licensing?" asked Elize Faivelowitz, a former traffic officer who served for 10 years in Cape Town.

"I understand that the law is the law. The challenge with a permit is who you know... as the City drags its feet. I feel the City must get their house in order. It's not that time consuming to get a permit."

Regarding impounding, Faivelowitz believes that unlike the past, there is less focus is on clamping down on drunk drivers because it doesn't bring revenue in for the City, while impounding vehicles does. "This, in my opinion, is the biggest legal extortion that the City has ever had."

Meanwhile, as the City of Cape Town continues to impound e-hailing operators’ vehicles, attorney Nicolene Schoeman-Louw argues that since the NLTA is silent on e-hailing impoundments, they are "unlawful" and "severely prejudicial".

Cease and desist letters

In letters dated 2 December 2020 and 29 November 2019, seen by this author, Schoeman-Louw demanded that traffic officials cease and desist impounding the cars of e-hailing drivers in Cape Town.

Schoeman-Louw, who has been representing drivers on the Uber and Bolt platforms for about five years, sent these letters to Western Cape Premier Alan Winde and other officials in the City of Cape Town who deal with licensing.

"We have received the courtesy of one response from the Premier’s Office saying that they will look into the matter and that they have referred it to the Western Cape department of transport," she explained.

Schoeman-Louw said her clients observed that after the letters were sent, the impounds "stop for a couple of weeks and then re-emerge".

A blame game?

In a generic response, Uber laid the problem at the door of the City of Cape Town: "Drivers depend on their vehicles to make a living for themselves and their families, however, continue to wait for their licences to be issued," said Uber SA's head of communications, Mpho Sebelebele.

"The process of operating licences has been delayed as there is a backlog with the City of Cape Town, and they continue to enforce impoundments."

Cape Town appears to be experiencing more impoundment problems than other cities, but Sebelebele pointed out that Uber does refund drivers who cough up the impound fine to have their vehicles released.

Uber hits the brakes on information

After 36 emails and 14 phone calls sent to Uber over a period of almost 90 days, South Africa’s biggest e-hailing company submitted a paltry response to multiple questions, as can be seen below:

Q: How many operating licences have been issued to Uber over the last 12/24 months?

No answer.

Q: Is there a cap on operating licences for Uber drivers?

No answer.

Q: Do you know what is causing the delays?

Partially answered.

Q: How much has Uber forked out for impoundments over the last 12/24 months?

No answer.

Q: How does this figure differ from the City of Johannesburg?

No answer.

Q: Can you provide me with some clarity with regards to the difference in requirements for Uber drivers to operate in Cape Town compared to Johannesburg? From media reports, Cape Town has a more onerous process and more requirements  ?  but this is not explained. Can you please detail what this difference is?

No answer

Q: Are you experiencing the same problems with regards to operating licences in Cape Town as in the City of Johannesburg?

Answered.

Q: What does Uber make of the allegation that there are deliberate delays in operating licences because the City of Cape Town is raking in money through impoundments?

No answer.

Q: What have your consultations centred on in Cape Town?

No answer.

Q: Is there anything else that you would like to add?

No answer.

She said the non-issuance of operating licences to drivers in Cape Town on the Uber platform was because of a "non-functioning system - and the problem is worsening as the backlog of permit applications steadily grows".

Sebelebele noted that drivers using the Uber application had already completed the requisite steps in applying for their operating licences under the current National Land Transport Act.

"All driver-partners using the Uber app have a Professional Driver’s Permit (PrDP), a roadworthy certificate, have undergone a background screening, and have completed a driving evaluation," she said.

As a company, Uber was doing as much as it could to make the process of obtaining operating licences easier for drivers and would continue supporting them, Sebelebele added.

Without going into detail, she said Uber continued to engage with the City of Cape Town, as well as the PRE.

"However, we have not been able to make any headway in reopening discussions on the issuance of operating licences and we would like to pick up on the discussion and find an amicable solution in smoothening the application process," she said.

Red light for operating licences in Cape Town

Meanwhile, the City of Cape Town said it meets with public transport operators on an ad hoc basis to discuss any operating licence supply and demand matters there might be.

"As a matter of interest, there are 15 e-hailing platform providers to which operators can subscribe for passengers to hail rides," said Van den Berg.

However, he noted that since imposing a moratorium in February, no further meetings had been held with any e-hailing platform providers, as the items listed as part of the moratorium must first be addressed before any further discussions will be entered into.

What is the moratorium all about?

In accordance with the municipality’s integrated transport plans, planning authorities have the powers to introduce and impose moratoriums on the applications for and issuing of new operating licences.

The City of Cape Town has issued two moratoriums in recent times: one that ended in 2014 after a considerable period and more recently, a three-year moratorium set to end in 2023.

“During the three-year moratorium period, the City of Cape Town will develop a supply and demand method that will determine the maximum number of operating licences required to ensure a sustainable number of metered taxi operating licences in the City of Cape Town,” Van den Berg explained.

In a letter to the PRE, seen by this writer, dated 24 February 2021, acting director of transport planning Tony Viera acknowledged the inadequacy of current legislation in dealing with e-hailing services.

He added that the innovative new service caught South Africa’s legislative and regulatory transport framework off-guard when it entered the country.

“Current national and provincial legislation as well as City by-laws, statutory documents and/or policies do not adequately address the provision of e-hailing services and the consequences should operators operate illegally and in so doing, oversaturate the market and jeopardise sustainability,” the letter read.

Some of the reasons cited by Viera for the moratorium included allowing the City of Cape Town to:

  • Take inventory of metered taxi/e-hailing operating licences in the system.

  • Develop a method to establish the demand for metered-taxi services that would govern support for any new metered taxi operating licences.
  • Review and update relevant bylaws, policies, statutory plans, and strategies related to the metered-taxi industry.
  • Establish a metered-taxi intermodal planning subcommittee as an umbrella body or forum for engagement with the industry.
  • The letter stated that considering the complexity of some of these issues, the moratorium should come into effect immediately and remain in place until 31 December 2023.

Schoeman-Louw argued that if there was a moratorium on the issuing of new permits, then it stood to reason that there were no grounds for impounds. "If there is nothing for you to comply with, how can you be non-compliant?" she asked.

A broken system and broken dreams

Despite the moratorium, Johann van Rensburg, who lectures transport economics at Stellenbosch University, said a major problem was that anyone could work as an e-hailing driver after being vetted and granted approval by an e-hailing company. "You don’t need an operating licence for this and therefore can actually start providing a service."

He also noted a complexity relating to policy. "The big issue is that government is of the view that Uber is a public transport company, but they say they are a technology company."

Van Rensburg continued:

"If they are classified as a public transport company then they are responsible for obtaining the operating licences for all vehicles using their platform. With this issue not being fully resolved, the responsibility falls on the driver or owner of the vehicle to obtain an operating licence. Many fail to do so and as such we have 'illegal' operators."

This inadvertently creates oversupply in the system, and this is what government is battling to manage, he said. 

The City might have halted the process because the market is saturated, but there are loopholes that make the entire system fraught, believes Reginald Kgwedi, a lecturer in the Department of Logistics at Stellenbosch University.

"The government must provide a conducive environment for all parties. We have a problem of a lack of political will in South Africa," said Kgwedi. "The government must provide a conducive environment for all parties," he said. 

In addition, he said municipalities were supposed to work with provinces to investigate issues around operating licences; however, this seemed to have stalled.

"For e-hailing companies, their service is in demand, they will continue using every avenue to continue serving their clients," he said. 

While the City of Cape Town is beset with continual delays because of an apparently broken system, and e-hailing companies continue to cash in, it is the drivers who are suffering in the process.

Worker benefits take a backseat for Uber drivers in South Africa

Tsungi Pamela Kujinga tried to put in several hours behind the wheel as a driver working on the Uber platform in Cape Town so that she could save enough money to cover the expenses that come with having a baby.

She gave birth to her fourth child during the lockdown. "I worked until the last day. I drove myself to the hospital," she recalled.

Kujinga, who is originally from Zimbabwe, said the Covid-19 pandemic meant there wasn’t much work because the movement of people was restricted. "Uber was adhering to the lockdown restrictions so we could only work certain hours."

The livelihoods of e-hailing drivers aren’t adequately protected under South African law, as in many jurisdictions around the world, because they don’t have employee status. This means no sick pay, paid leave, pension contributions or maternity leave benefits.

The challenge faced by Kujinga is partly corroborated in the annual South African Fairwork report, released in July 2021.

The report presented a set of scores that evaluated platforms such as Uber, SweepSouth and Mr D Food against five principles of fair work: Fair Pay, Fair Conditions, Fair Contracts, Fair Management, and Fair Representation. The scores provided an independent perspective on work conditions for policymakers, platform companies, workers, and consumers, the report stated.

For two years in a row, Uber scored a measly four out of a possible 10 points.

South African Fairwork report

Covid-19 lockdowns inflicted heavy pain on drivers when there were fewer people travelling and during more restricted hours, said Professor Jean-Paul van Belle of the University of Cape Town’s (UCT) Department of Information Systems, the lead author on the report.

He said the main change observed with Uber was that the income for drivers had shrunk. "This is due both to the lack of adjustment of tariffs to account for increased petrol and other costs, as well as the introduction of discounts," Van Belle said.

In 2013, the same year that Uber started operating in Cape Town, the price for unleaded 95-octane petrol was R12.65 per litre at the coast in November, compared to R18.82 in November 2021, according to the Automobile Association’s fuel pricing calculator. This represents an average increase of R6.17 in the price per litre of petrol.

Fares drop, petrol price surges but commission fees stay the same

Bemoaning rising fuel costs and "unfair" working conditions, about 100 e-hailing drivers marched to Parliament on a hot Friday morning in November 2021. They handed over a memorandum of demands to representatives of the transport and labour departments, urging government intervention. The memorandum included capping the commission fee at 13%, a minimum rate of R10 per kilometre to account for petrol price hikes, and that they to be included in important decision-making.

The chairperson of the activist organisation, Cape Town E-Hailing Drivers, who asked not to be named for fear of victimisation, said the protest followed Uber’s decision to drop ride fares earlier that month, despite still claiming a 25% commission fee.

Faivelowitz, who now runs a fleet management company, said:

"The commissions that they are charging are ludicrous... They are exploiting the drivers tremendously."

She said the economic impact of the coronavirus outbreak compounded already rising living costs and tough working conditions. "The industry basically always required a minimum of 12 hours a day for six days a week, but now the industry requires more than 12 hours a day, seven days a week."

The drawback of these long hours, Faivelowitz pointed out, was driver fatigue on the road, which meant they were more prone to accidents. "The danger on our roads is so much more because we've got tired people whose minds aren't focused on driving."

Social scientist Dr Kelle Howson, a researcher on the Fairwork project at the Oxford Internet Institute, said Uber continued to work with Fairwork to improve its score in South Africa.

Howson said while Uber had succeeded in satisfying some of Fairwork’s criteria in South Africa - such as improving health and safety and security provisions, and anti-discrimination work - there was still a long way to go to reach minimum standards of fair work.

"For instance, Uber has yet to guarantee to their workers that their earnings will not fall below a minimum wage after costs. Moreover, Uber has yet to take steps towards fair representation for workers in South Africa, including by recognising a representative collective body which can negotiate with Uber on behalf of workers."

The Competition Commission also noted the lack of a representative collective body in the e-hailing sector after its inquiry into the public passenger transport market, e-hailing and metered taxi services.

E-hailing operators should be empowered to represent and advance the interests of the industry, stated the report. It recommended the national transport department, with provincial regulatory authorities, assist in establishing a national association of e-hailing operators.

The recommendation came in the wake of an attempt by about seven drivers, the founders of the Uber Drivers’ Guild, to bring together a collective organisation for workers associated with the e-hailing platform.

One of the seven drivers, Derick Ongansie, remembers the agony that led to establishing the Uber Drivers’ Guild.

He said two of their major gripes at the time were that Uber started accepting cash payments and introduced Uber X, which was cheaper than Uber Black.

"We had no choice but to start driving on Uber X because passengers opted for it, and because of that we weren't able to service our debt with the banks," said Ongansie, who turned to the bank to finance a new BMW in the hopes of making a living though offering his service on Uber Black.

"The cash also made us a target for criminals and put us in direct competition with the metered taxis, which heightened tensions between us," he said. 

Ongansie added:

"We thought we were going to have decent jobs, but in fact all the stakeholders were profiting from the drivers. The passengers got cheap rides. The banks were making money because we bought cars. The insurance companies got more clients. Uber got commission. The law enforcement targeted us for fines, and then the criminals also saw us to make a quick buck through robberies. It is a vicious cycle."

Ongansie explained that the guild aimed to draw up a constitution and hold elections once officially recognised. They planned to have a seat at the negotiating table to discuss how drivers were treated by Uber, dropping cash trips, and securing a commitment to ensure their safety.

Putting spokes in the guild’s wheels

However, Uber clamped down on several of the founding members, who had been outspoken in the media, by deactivating them from the application. This was perceived by drivers as a warning to resist the agency of collective organisation.

"I was part of a group of about 200 drivers who led a protest to Uber's office in Cape Town. Suddenly, I was then one of three drivers who was deactivated from the platform and, up until today, I don't know why," Ongansie said.

What followed was widely considered to be a major test case for workers on the e-hailing platform, when the drivers lodged a dispute with the Commission for Conciliation, Mediation and Arbitration (CCMA). The drivers alleged that when they were deactivated from the Uber app, it constituted an unfair dismissal in terms of the Labour Relations Act.

The CCMA ruled that Uber should be considered the drivers’ employer and therefore the drivers should be recognised as employees and not independent contractors. This was based on the controlling relationship Uber had with drivers as well as the drivers’ economic dependency on the income.

"They [drivers] are not independent contractors in any true sense and they are in fact highly dependent on Uber for work," commissioner Winnie Everett ruled in 2017.

Uber SA then turned to the Labour Court to review and set aside the CCMA’s jurisdictional ruling. On review, the Labour Court pointed out a crucial distinction, stating that the commissioner had conflated Uber SA and Uber BV. The Labour Court ultimately set aside the commissioner’s ruling and upheld Uber SA’s objection to the jurisdiction of the CCMA, and the Uber drivers’ referrals were dismissed.

However, Judge Andre van Niekerk noted in his 2018 ruling:

"Whether the drivers are employees of Uber BV (either alone or in a co-employment relationship with another or other parties), or whether they are independent contractors of Uber BV, is a matter that remains for decision on another day."

Another matter for another day is the formation of an official representative body that can stand up for workers affiliated to e-hailing platforms. Ongansie said the Uber Drivers' Guild, which garnered support from about 2 000 drivers at the time, eventually imploded because the drivers were so diverse and fragmented, which resulted in little progress on charting a way forward.

Meanwhile, the employee status of those working on the Uber platform remains moot. Kgwedi said that for those without operating licences, it is always a struggle. "In some cases, drivers are forced to exit the market because of the conditions."

Muzengi was forced to quit her job as a driver during the pandemic because she wasn’t making ends meet. However, she now feels calmer knowing she no longer has to dodge traffic officers.

women ehailing drivers

She said that although completing her last year to become a social worker is on hold, she was fortunate that, through being a driver, she got a taste of making her dream come true.

Her eyes glowed as she recalled an endearing moment about how a conversation with a teen passenger led her to reuniting a father and son. "We were chatting, and when I told him that I am from Zimbabwe, he told me that his father, who met his mother in Angola, is also Zimbabwean but he never met him, and he gave up trying to find him."

Before the 17-year-old stepped out of her car, she asked him to scribble his contact details and his father’s surname down on a piece of paper. "I thought it would be easy to track him down if I had a surname."

Muzengi used the information to ask family and friends in Zimbabwe if they knew anyone with the same surname. She also put the word out to a couple of WhatsApp groups for Zimbabweans. But it was on Facebook that she struck gold and, soon after, she helped mediate the meeting between the father and son.

"It was late at night when I was scrolling through Facebook and spotted someone with the same surname. I sent him a message to ask if he knew this particular man and, by the morning, when I woke up, I saw lots of messages. He said the man was his uncle. It was his father’s youngest brother," she said. 

While helping this family reunite was an uplifting experience, Muzengi still hankers to fulfil her ambitions. Taking a spoonful of her tomato soup she said: "I still dream of being a social worker."

Her dream remains impounded.

*This is an edited version of a research project into e-hailing drivers in Cape Town by Adiel Ismail as an Open Society Foundation investigative journalism fellow at Wits University.

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