Price hikes add fuel to fire in taxi industry
The record petrol price is squeezing minibus taxi operators and may contribute to an uptick in violence, industry experts say.
The petrol price is up to R17.08/l in Gauteng from R12.85/l in December 2016.
Experts expect more calls for subsidies and support for the essential industry valued at R50bn, which transports 20-million passengers daily in more than 200,000 vehicles. It is struggling with tight operating margins, they say.
SA National Taxi Council (Santaco) spokesperson Thabisho Molelekwa says petrol price increases since March have been “unprecedented” and followed VAT and fuel levy rises. Petrol in SA is now up to 30% more expensive than in other Southern African Development countries, he says.
Taxi fares have gone up, but where communities cannot afford to pay them taxi operators charge “compassionate fares” which reduces profitability, Molelekwa says.
“The government needs to intervene to support the industry. It would be disastrous if the industry was to find itself in a situation where it can no longer move the 68% of passengers it carries due to huge, unmanageable operational costs.”
Sam Rolland of Econometrix says many taxi commuters have few other transport choices. Operators face stiff competition over routes and passengers.
“There is incredible pressure on operators to complete as many trips as possible in peak hours to achieve scale to make routes profitable,” Rolland says.
This contributes to cutting corners on vehicle maintenance and aggressive driving, further damaging the reputation of an industry often perceived as needing to “formalise”, he says.
Herrie Schalekamp, of the University of Cape Town’s Centre for Transport Studies, says the minibus taxi industry has formalised in terms of existing legislation. An operating licensing system logs routes, vehicles and owners; taxi associations must be registered and have constitutions; and laws govern roadworthiness and vehicle safety specifications.
“The challenge is adherence,” says Schalekamp. “It’s the state’s failure to enforce the rules it has put in place that creates the space for informality to thrive.”
It is estimated that there are twice as many taxis on the roads as needed. A third to a half of the taxis in Cape Town operate illegally and the city has more than 100 associations and thousands of operators, Schalekamp says. Associations earn fees from operators, so “it’s in their interests to allow as many people as possible into their association”.
This “atomised” model with thousands of stakeholders means a scramble “for land, for business, for market”, he says.
“People are under pressure. If we were able ever to collect comprehensive statistics, we might see that the economic cycle and incidents of violence correspond. Because there’s no cushion provided by the state, other means of negotiating strong competition [must be found] and violence is one of them,” he says.
The only state support taxi operators get is a capital subsidy. The Taxi Recapitalisation Programme pays operators around R90,000 to scrap pre-2006 vehicles. This can be used towards the cost of a new vehicle. A new Quantum costs about R440,000.
In his 2018 budget speech Transport Minister Blade Nzimande announced that the programme would be revised to “enable the taxi industry to leverage and exploit downstream opportunities” and the scrapping allowance would be increased. He promised that the subsidy would receive attention.
At the recent Competition Commission inquiry into the public passenger transport market, bus companies defended operating subsidies. The Treasury put public transport subsidies at about R10.2bn in 2012-13.
Golden Arrow CEO Francois Meyer said at the inquiry that the taxi industry had lower overheads due to its informality.
“If we could also operate like a taxi service we would not need a subsidy,” he said, citing labour costs, the Unemployment Insurance Fund, training costs, depot and security costs and scheduled services “whether there are 20 or 70 people on the bus”.
However, minibuses can operate only if they keep margins tight because they do not receive any operating subsidies. The Treasury has noted that “the competitiveness of the sector depends to some extent on its informal character”.
“The biggest service provider is not being recognised,” says veteran Cape Town taxi operator Basil Nagel. Subsidies are a burning issue, he says.
Molelekwa said Santaco welcomed Nzimande’s commitment to review subsidies. The organisations wanted the scrapping allowance increased to cover a full deposit on new vehicles, real empowerment and less excessive interest rates charged by financial institutions.
Operational subsidies must also be addressed, he said. A revised subsidy regime “should be commuter-oriented” and address the disadvantage taxi commuters face in favour of bus and rail passengers.
Schalekamp says more subsidies for taxis could be a carrot that would give operators room to improve service and business efficiency, but then the stick of enforcement must be designed to ensure compliance.
Proposed and current industry reforms range from better data systems to capture and coordinate operating licence records; in-taxi Wi-Fi, 22-seater vehicles on appropriate routes and cashless card payment systems, he says.
Long-term solutions such as electric vehicles and alternative fuel sources should also be considered. But what’s important now is examining the price of fuel for the taxi sector, he says.
Nagel, who has advised government on taxi industry reform since 1994, believes the industry needs to become more business-minded and the association model holds back growth.
Rolland says violence and competition for routes are symptoms of a weak economy. Stagnant growth in the past two years has meant limited opportunity for new entrants and increased competition for current routes, as operators try and increase profitability by scaling up to new routes, he says.
‘THERE’S NO CUSHION ... OTHER MEANS OF NEGOTIATING COMPETITION [MUST BE FOUND] AND VIOLENCE IS ONE OF THEM’
‘LONG-TERM SOLUTIONS SUCH AS ELECTRIC VEHICLES AND ALTERNATIVE FUEL SOURCES SHOULD ALSO BE CONSIDERED’
Tight Margins: Petrol in SA is now up to 30% more expensive than in other Southern African Development countries and the taxi industry cannot keep up.