The South African Taxi Industry

Taxis are the most popular mode of transport in urban areas for the majority of South Africa’s population. Public transport by taxis account for 65% of the transport total, 20% by bus and 15% by rail ¹.

Due to the informal nature of the taxi industry, it is has been difficult for Government to regulate the industry. However, the government through the National Department of Transport identified the vital need of formalising and regulating the industry through the National Land Transport Transition Act, Act No 22 of 2000.

Brief history of taxi operations in SA

Law restricted taxi operations until 1977 to sedan motorcars fitted with fare meters. In 1977 minibuses were introduced to the taxi industry allowing one driver and fifteen passengers.

In 2000, Government introduced a four-year taxi re-capitalisation programme in its drive to formalise the industry. The programme is aimed at the individual operator offering affordable, purpose-built, safe and convenient public transport. Current minibuses will be replaced with 18- and 35-seat minibuses.

Structure

The taxi industry consists of minibuses, dominating 90% of the market, and metered taxis active in the remaining 10% of the market ².

Minibuses and Metered Taxis Structures

SA National Taxi Council (SANTACO) and SA National Metered Taxi Association (SAMTA)

 Provincial Taxi Councils

Regional Taxi Councils

Local Taxi Councils

Local Taxi Associations

Taxi Companies/Operators

Taxi operators organise themselves into Local Taxi Associations that form Local Taxi Councils. The Local Taxi Councils in turn elect representatives from local councils per region and form Regional Councils. Representatives from Regional Councils elect Provincial Councils that in turn elects the National Council that is tasked with upholding national issues and policies.

The National Council represents the national taxi industry by mandate of conference.

Size and monetary value

The industry consists of approximately 150 000 public minibus taxis.

It is difficult to determine the number of metered taxis operating in SA due to the informal structure of the industry. The Western Cape and KwaZulu Natal taxi industry seem to be well coordinated while taxis in Gauteng in particular are not that well coordinated. Gauteng has about 3 700 metered taxis, only 1 860 of which are legal ³.

The South African taxi industry is estimated to have a turnover of approximately R16,5 billion ⁴. The precise contribution of the taxi industry to the country’s GDP is unknown. Many taxi operators are not registered as taxpayers, although they may well be registered with the Department of Transport as taxi operators.

Quantity restrictions and fare-setting

SA’s taxis are not formally subjected to quantity restrictions, but the Department of Transport seems to have stopped issuing permits while it decides on how to formalise that process.

In the case of minibuses, different individual taxi associations appear to decide collusively on taxi fares to be charged per route, outside consultation with, or interference by, the authorities.

Note that according to Section 4(1)(b)(i) of the South African Competition Act, Act No 89 of 1998, such agreements between competing firms, or an association of competing firms, are prohibited as they involve directly or indirectly fixing a purchase or selling price or any other trading condition.

At present, minibus commuters are charged fixed amounts for travelling on particular routes. These routes are generally known, without being published. In the case of metered taxis, there appear to be two types of fares: metered prices and negotiated prices. The metered price is the ‘official’ pricing that should be complied with, and is set by the taxi associations, again apparently collusively.

Illegal taxi operators charge negotiated prices because of the lack of a meter reading, while legal taxi operators often choose to charge negotiated prices for fear of losing business. It is common practice to set fares according to their perception of the customer’s willingness to pay.

Current meter reading fares are charged as follows: an initial fare of R2.00, then R5.50 per kilometre and 10 cents per 20 second period of engine idling time ⁵. There is no charge for the distance travelled by the taxi to the client, so the fares mentioned must cover that distance as well. Some taxi companies also offer special rates of up to 50% discount for disabled passengers and pensioners.

Unregistered ‘metered’ taxis that operate without a control center acquire business by means of:

• Parking at taxi ranks and cruising past known pick-up spots

• By distributing business cards to retain regular clients. Freedom from tax liability as well as freedom from having to pay monthly membership fees of approximately R500 compensate for the lack of a control centre for unregistered metered taxis.

Regulatory regime governing the industry

Illegal operators in the industry contribute to violence and tax evasion. Regulating the industry envisages eliminating violence and improving tax revenue collection from the industry.

A backlog in the administration and registration of taxis in the Department of Transport is being addressed. Permits are formally issued, and converted from radius to road-based permits. A national database is being established in conjunction with the provinces. A short-term window period to comply with legislation is being established to accommodate non-registered taxi operators, and unsuccessful applicants. These measures should provide Government with a sound base to regulate the industry.

The taxi re-capitalisation programme referred to is expected to cost R4 billion. The minibuses will include:

• electronic fare collection for tax revenue collection

• vehicle tracking, which improves the ability to monitor and control operations more effectively, both from an enforcement and operator perspective.

These measures impact directly on commercial risks of operators, financiers and insurers, and therefore on stability in the industry.

The re-capitalisation project envisages that Government will assist taxi operators by providing subsidies to buy new vehicles. The qualifying condition for a subsidy would be that legal operators would submit their current (legally registered) vehicles for scrapping in exchange for the purchase of a new vehicle. For example, a ten-year-old fifteen-seater would be exchanged for a new 18-seater. The submission of two 15-seaters would be exchangeable for a new 35-seater. Government would issue a 30% subsidy on the value of a new vehicle.

Conclusion

The South African Taxi industry plays an important role in the economy considering that the majority of South Africans are poor and dependent on public transport. Lack of regulation resulted in a massive informal component of the industry.

Current formalisation processes may help implement the proposed regulations, which will eliminate illegal operators, improve tax revenue collection and solve other problems surrounding the industry, such as safety and service levels.

From a competition perspective, however, it is not clear that increased regulation will provide benefits to consumers that will outweigh the likely inflationary effects on fares. After all, the elimination of illegal metered taxis will reduce the supply of taxis and relieve competitive pressures on the remaining participants.