Taxis do govt’s work on public transport, should get subsidies

Hundreds of minibus taxi operators in South Africa recently defied the government’s Covid-19 restrictions prohibiting them from carrying full passenger loads.

They complained that restricting them to a maximum 70% load – to enable social distancing – made it impossible to make a profit and to earn a living. They were finding it hard to cover their running costs and risked having their vehicles repossessed by the banks for failure to repay the loans on them.

Before the protest, the government allocated a one-off R1.135 billion relief package to taxi operators. But the South African National Taxi Council rejected it as too little. Their demand equated to about R4 billion a month.

Some taxi operators have since increased fares by between 10% and 25% to make up the shortfall, hitting commuters in the pocket. The government eventually acceded to the industry’s demand to be allowed to carry a full load of passengers – except for long distance travel.

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The latest spat between the industry and the government is symptomatic of a bigger, fundamental issue. The problem, in my view, is that the government relies on the minibus taxi industry, which is basically informal, to provide public transport, which is the responsibility of government. This anomaly needs to be addressed.

The solution lies in the successful formalisation of the industry and its full integration into the national public transport strategy. The industry should then benefit from government subsidies, as do the rail commuter and bus services. This would also require the industry to abide by minimum safety standards.

Importance of the industry

My research shows that although the operations of the industry are informal and unregulated, it is an integral part of the South African public transport sector, and plays a critically important role in the country’s economy.

The industry accounts for 75% of all daily transport – about 15 million commuter trips daily to work, schools and universities, to access healthcare or for leisure.

Taxis are used by the majority of commuters, even though they are more expensive than buses and trains, because they provide an efficient service, especially over shorter routes. They are also more widely available, reaching places that the buses and trains do not.

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There are about 200,000 minibus taxis in South Africa. The industry employs about 300,000 drivers and 100,000 taxi marshals. It also benefits 100,000 car washers and 150,000 vendors at taxi ranks.

Given South Africa’s high unemployment and poverty rates, the importance of the industry should not be underestimated.

Exact figures are hard to pin down because the industry is unregulated and operates on a cash basis. But it is estimated that the industry generates R90 billion in revenue annually, and spends about R39 billion on fuel and about R2 billion on vehicle insurance.

Each taxi makes an estimated annual revenue of R450,000. On the route from Johannesburg to Durban (595km), for example, the average profitability per taxi is R37,000 a month.

Public transport

The National Land Transport Transition Act of 2000 recognises that subsidies should be aimed at assisting low-income users and those who have poor access to social and economic activity.

This is especially important given that South African cities are poorly connected in terms of public transport. This has resulted in huge inequalities in accessing public transport.

There is a poor connection between townships (largely black residential areas) and the country’s central business and industrial areas, where the jobs are. Thus, people who are least able to pay for transport have to travel the greatest distances.

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The minibus taxi industry plays an important role in closing that gap. Government subsidies are thus imperative – but the industry still does not receive them.

In contrast, bus and train commuters, who make up about only a third of the daily commuters, benefit from government subsidies.

Subsidies are paid for train services provided by Metrorail, a division of the Passenger Rail Agency of South Africa, and the Gautrain – the rapid train service that links Johannesburg, Pretoria, Ekurhuleni and OR Tambo International Airport. They are also paid to municipal bus services as well as private bus operators contracted by the provincial governments and municipalities.

As the Competition Commission has observed, governments across the world subsidise public transport in order to promote mobility.

Importantly, the government’s subsidy policy does not provide justification for the exclusion of minibus taxis.

Need for change

The protest by the taxi operators reinforces the need for the industry to be subsidised by government.

But, for that to happen, the industry needs to undergo fundamental change. In my assessment, the subsidisation of the industry needs to be preceded by discussions between the government and the taxi industry on how to formalise and regulate the industry. This, with a view to fully integrating it into the country’s public transport system.

The formalisation process should entail the industry changing the way it does business. This includes putting in place proper accounting systems, as required of all formal businesses. This is vital for it to be able to account for the subsidies it would get from the government.

This requires dedication and commitment from both the government and taxi owners to resolve.

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