Price hikes add fuel to fire in taxi in­dus­try

Business Day - - NATIONAL - Ja­nine Stephen

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’

/Mo­hau Mo­fo­keng/Sowe­tan

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.

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