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South Africa taxi owners default bank loans due to a plunge in business

Without ‘a small rescue package’ from government and divided representation, South Africa’s minibus taxi industry may fail to rebound.

Sibhekisipho Fayayo

JOHANNESBURG—Experts in urban transportation and infrastructure development say more funding and regularization for a crime ridden minibus transport industry battered by the physical and social distancing measures caused by the COVID 19 pandemic will provide an alternative, seamless transport model for South Africa, considered to have the strongest economy in the SADC region. 

About 300 000 taxis plied South Africa’s roads before lock-down measures were introduced at the onset of the COVID 19 outbreak in March to cater for an estimated 15 million daily commuting public in the capital, Johannesburg, according to the Taxi Chamber.

But as the pandemic took toll, with the social and physical distancing measures introduced by government, the taxis were greatly affected by the cut in the number of passengers carried per trip.

Failure to carry maximum loads of passengers to allow for social distancing, the taxi operators said, saw some parking their cars due to losses and may fail to get back on the roads after months of a hiatus from the traffic jungles.

But some errant minibus taxi industry briefly complied, before defying the passenger limits directive by government.

They complained that to allow social distancing, limiting them to a maximum 70 percent load per trip made it difficult to profiteer and remain in business.

The high operating costs saw some taxi owners with bank loans defaulting due to a plunge in business.

Transport Minister Fikile Mbalula in September this year said an estimated 63 000 of the taxis ply without operating licences and are therefore illegal. The owners of the unregistered minibuses, he added, operate as sole proprietors who do not pay taxes to government.

The government allocated a one-off R1.135 billion relief package to taxi operators prior to the defiance on physical distancing by the taxi operators. But it was dismissed as too little by one of their representative body, the South African National Taxi Council (Santaco). They instead want R4 billion per month.

Siyabulela Christopher Fobosi, a senior researcher at Fort Hare University, says the problems in the taxi industry are symptomatic of a larger and fundamental crisis of urban transportation in South Africa.

He said the solution lies in the successful formalization of the industry and its full integration into the national public transport strategy.

“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 informal, to provide public transport, which is the responsibility of the government. This anomaly needs to be addressed.

“The solution lies in the successful formalization 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,” said Fobosi.

To make the country’s wide but informal minibus taxi industry viable and free of crime, the South African government has initiated a process to formalize and regulate it.

It envisages reforming the industry “along with legally recognized business units” that pay corporate tax and comply with labour laws. Eventually, the formalization would pave the way for taxi commuters to benefit from subsidies for public transport, resulting in lower fares.

At the recently held three-day taxi symposium in Johannesburg, President Cyril Ramaphosa urged taxi bosses to support his government’s proposal to formalize and control the industry for the good and safety of drivers and passengers.

Ramaphosa said that the taxi industry would play an important role in the ultimate goal of the government of enhancing commuters’ daily experiences by developing integrated rapid transportation service networks in metros, suburbs, towns and rural districts.

“When public transport is unsafe, unreliable and costly, it also affects economic activity. Given that about four in 10 workers use public transport to reach their workplaces, these challenges have knock-on effects on productivity, labour relations and business functioning,” he said.

“As part of the programme to build a new economy, we are working with all stakeholders to improve the state of public transport.”

The President’s economic rebuilding and recovery plan unveiled earlier last month recognize that upgrading transport infrastructure is essential to economic growth and the expansion of industrial production.

“As part of our plan, we have embarked on projects to modernize and refurbish commuter rail networks alongside the expansion of road rehabilitation and maintenance programmes.

“Upgraded transportation infrastructure, coupled with improved public transport is a key driver of economic activity,” said Ramaphosa.

Mbalula claims that the realization of the taxi industry’s formalization, regulation and empowerment would be the game-changer needed to radically transform the public transportation system of South Africa.

Mbalula admitted that more funding is needed for the taxi industry if it is to change. He said that the government plans to introduce a subsidy for the R50bn taxi industry by April 2021.

“It’s long overdue: if you transport 15-million people per day, then that industry deserves a government scheme as we do with other modes of transport.”

 “The participation of this industry in the subsidy scheme is no longer a pipe dream, but a realizable goal we intend to see becoming reality in the coming financial year.”

Alec Moemi, Transport Director-General, said currently the government provided direct and indirect subsidies, such as the public transport operators grant.

Moemi said they were looking at subsidizing vehicles and the prospect of introducing tax rebates.

Investment expert Luzuko Nomjana said with appropriate risk-reward measures in place, the taxi industry is an alternative investment choice, particularly with plans underway to formalize the industry.

 “Many investors are not interested in investing in the taxi industry because of its image as being hard to control, difficult to understand and highly politicized. Determining the magnitude of the risk is therefore complicated.

“While this view is easy to understand, we should not underplay key reasons why this industry has thrived for so long with minimal government support. The industry has a growing customer base as more people flock to the city in pursuit of better job opportunities (urbanization). This economic fundamental is likely to remain in place for decades to come as development in non-urban areas continues to take a back seat, driving people to relocate to cities. As a result, the demand for minibus taxis has consistently exceeded supply in recent years,” he said.

The minibus taxi industry was founded by black people in South Africa and continues to serve much of that population. The industry traces its history back to the 1930s when five seater sedan cars were used by the early taxi operators for trips within black communities only. By then, the law stipulated that four passengers must be in the taxis.

Deferred  formalization

In his study titled, Rethinking the formalization of the minibus taxi industry in South Africa, Louis Jacobus Fourie reveals that after apartheid, attempts were made from April 1994 to put the industry under some form of control and to formalize its operations.

The National Taxi Task Team was formed in 1995 by the Nelson Mandela led black government to look for ways to improve safety and profitability and end violent conflicts over routes. The task team suggested overseeing and formalizing the industry.

 “Since the 1990s, the government has been making efforts to change the industry. The National Taxi Task Team (NTTT) drove the industry’s transformation in 1995. Such a change depended on the ensuing recommendations as embraced in 1996: formalizing the minibus taxi industry; regulating and controlling the industry; capacity building and training; and establishing conditions so that the industry is able to maintain and sustain itself economically,” wrote Fourie.

Twenty-five years after these recommendations, the government hosted the National Taxi symposium to address the following main issues: the unity and leadership of the taxi industry; the empowerment model; regulation, professionalization and customer service.

Another minibus operators representative body, The National Taxi Alliance (NTA), with 188 taxi associations affiliated to it throughout the country, however walked out of the symposium.

It claimed that the government behaved in bad faith, that the minister of transport was biased towards another rival taxi association, Santaco.

The National Taxi Association (NTA) has also warned Mbalula that, should decisions arising from the national taxi symposium adversely affect its members, it will not hesitate to approach the courts.

Subsequent disputes over representation have arisen between the two bodies, which continue to create problems for the Taxi Recapitalization Programme (TRP), launched in 1999. The TRP is central to the taxi industry’s formalization and transformation. However, while some of the old taxi operators have benefited from the TRP, most of them have not. Hence, for most taxi operators and drivers, the mechanism has not succeeded.

The involvement of two mother bodies, each claiming to represent and act on behalf of the industry, greatly complicates the government’s attempts to consult the sector and to reach binding agreements.

South Africa’s minibus taxi industry accounts for three quarters of daily vehicular traffic in the country, according to researchers.

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