Transport sector and government must adapt to digital economy

There are opportunities and challenges that come with a changing industry, as evidenced by Uber and Taxify

The Competition Commission has received numerous formal complaints relating to public transport since 2009. Most of these have related to excessive pricing on longdistance bus services (especially during holiday peak periods) and restrictive practices such as certain taxi operators being denied entry to airports to compete with other taxi association members.

These complaints were lodged against the backdrop of a sector that is highly fragmented in nature and afflicted with a history of violence and conflict over routes within the taxi industry. However, in the recent past, tension has also been raised and lives have been lost due to the threat posed by the entry into the market of app-based or e-hailing taxi services such as Uber Technologies and Taxify.

Uber and Taxify are the main app-based services in SA. It also appears that local alternatives are entering the market, including Scoop a Cab and Ryda.

The commission received a complaint from the metered-taxi industry against Uber for alleged unfair business practices, charging below-cost rates and noncompliance with public transport rules and regulations. This is all in the public domain through media reports.

While the fare structure of traditional metered taxis must be published in the Provincial Gazette by the transport minister or MEC in consultation with the relevant authority, prices charged by app-based services are not regulated.

App-based services use a dynamic pricing system in which fares are determined by demand and supply. Prices may increase significantly during periods of high demand, such as evenings and weekends, special events or adverse weather conditions. If there is high demand for rides and fewer drivers on the roads, the price increases.

Battles between app-based taxi services and metered taxis are not unique to SA.

In fact, last Monday, the Organisation for Economic Co-operation and Development (OECD) held meetings in Paris, France, during which various countries discussed taxis and app-based taxi services. The OECD is an intergovernmental organisation that provides a platform for governments to work together, to share experiences and to find solutions to common problems.

The commission was invited to make a submission, which focused on understanding traditional metered taxis’ competitive response to the introduction of app-based taxi services.

The OECD sought a deeper understanding of the extent to which competition authorities around the world have analysed competition dynamics in their respective taxi industries and whether there have been specific interventions to deal with anticompetitive conduct within the metered taxi industry.

The removal of any regulatory burden, to level the playing field among taxi services, also formed part of the discussions.

In SA, there is no law governing app-based taxis and there has been uncertainty over how these services should be regulated. As a remedy, the National Assembly passed the National Land Transport Amendment Bill two months ago to address regulatory gaps.

Public transport is an essential service for about 80% of the South African population. It is dominated by the taxi industry, which accounts for about 70% of total transport usage. Of this 70% total, minibus taxis account for about 63%, while the metered-taxi industry accounts for 7%.

In relation to some of the complaints lodged with the commission over recent years, a conclusion was reached that advocacy engagements with relevant role players in the transport industry might lead to better outcomes. The commission has been interacting with transport regulators, different spheres of government, taxi associations and app-based service providers as key stakeholders.

The commission’s submission to the OECD was based on qualitative research conducted in 2017 relating to public transport.

The research revealed that competition between traditional metered taxis and app-based taxi services was intense and often characterised by resentment. As a result, violence between the traditional metered-taxi industry and e-hailing services had been witnessed.

The research also revealed concerns by the traditional metered-taxi industry that app-based services entered the metered-taxi industry illegally and continued to operate illegally by not adhering to applicable laws that traditional metered taxis were subjected to.

Traditional metered taxis complained about the lack of enforcement of regulations, which led to app-based services entrenching their dominance in the market.

It appeared as if app-based services such as Uber and Taxify operated in two-sided markets for local transport, in that it appeared as if they competed for both riders and drivers. On the rider side, app-based services seemed to compete with, and were constrained by, metered taxis.

On the drivers’ side, these services competed with other transport services.

The potential benefits of these services are convenience and certainty and, although this still has to be confirmed through a study, it also appeared that the pricing of trips seemed to be lower than that of traditional metered taxis.

Most metered-taxi operators are organised under the South African Meter Taxi Association and, interestingly, the research indicated that they were starting to gravitate towards and respond to the app-based model, through an app-based service referred to as Yookoo Ride.

There are also simpler mobile apps for booking cabs, such as the mobile platform of Rose Taxis, based in Johannesburg.

While a reasonable number of traditional metered taxis introduced technology to be able to compete with Uber, the impact had not been very pronounced due to Uber brand loyalty.

The research also indicated that some traditional metered-taxi drivers had opted to register with Uber or Taxify and, in some instances, they registered on both apps. Independent drivers were not tied to specific contracts by app-based service providers and they therefore had the liberty to use various app-based services simultaneously.

Due to the insistence that app-based taxis have better vehicles as part of their vetting process, some metered-taxi drivers with older vehicles were not able to join these app-based taxi services. There were also indications that the City of Cape Town envisaged using e-hailing apps on minibuses, to transform the minibus taxi industry into a demand-responsive service.

The National Development Plan projected that by 2030, 7.8-million more people would be living in South African cities than in 2012. There have also been projections that at least 80% of SA’s population would live in urban areas by 2050.

Given the added pressure on infrastructure and an ongoing and growing demand for public transport, both the government and industry need to understand and be ready for the opportunities and challenges that come with an ever-evolving digital economy.