Business Day

Price hikes add fuel to fire in taxi industry

- 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.
/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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