Petrol price surge adds fuel to the fire in minibus taxi sector
Pressure for subsidies as operators battle to stay afloat with extremely tight operating margins, writes Janine Stephen
The record petrol price — up to R17.08/l in Gauteng from R12.85/l in December 2016 — is squeezing minibus taxi operators and may contribute to an uptick in violence.
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 extremely tight operating margins.
SA National Taxi Council (Santaco) spokesperson Thabisho Molelekwa says petrol price increases from March have been “unprecedented” and followed VAT and fuel levy increases. Petrol in SA is now up to 30% more expensive than in other SADC countries, he says.
Taxi fares have gone up, but in places where communities cannot afford to pay them taxi operators charge lower “compassionate fares”, which reduces their profitability. “The government needs to intervene to support the industry,” says Molelekwa.
“It would be disastrous if 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. We are open to ideas on how the pressure can be eased, but if government does not act, we will have our backs to the wall … to the detriment of commuters.”
Sam Rolland of Econometrix says many taxi commuters have few other transport choices and are forced to pay higher fares. 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”.
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. There is an operating licensing system that logs routes, vehicles and owners; all taxi associations must be registered and have constitutions; and laws take care of road-worthiness 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. Cape Town 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”.
“People are under pressure,” says Schalekamp. “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.”
The only state support taxi operators get is a capital subsidy. The Taxi Recapitalisation Programme pays operators more than R90,000 to scrap older-model (pre-2006) vehicles, which 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 will be revised to “enable the taxi industry to leverage and exploit downstream opportunities in the entire taxi value chain” and increase the scrapping allowance. He also promised that the subsidy will receive attention.
Subsidies are a burning issue. If bus subsidies were ‘unplugged now, they would close their doors tonight’.
At the recent Competition Commission inquiry into the public passenger transport market, bus companies defended their operating subsidies — Treasury puts public transport subsidies at about R10.2bn in 2012-2013.
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 people on the bus or 70”. However, minibuses can operate only if they keep margins tight because they don’t receive any operating subsidies.
The Treasury noted that “the competitiveness of this sector depends to some extent on its informal character”. “The biggest service provider is not being recognised,” says veteran Cape Town taxi operator and self-described “taxi empowerment catalyst” Basil Nagel.
Subsidies are a burning issue, he says. If bus subsidies were “unplugged now, they would close their doors tonight”.
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, says Molelekwa.
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 kind of “carrot” that would give operators room to improve service and business efficiency – but then the “stick” of enforcement must be well designed to ensure compliance. Operators needed to be involved in any reform proposals.
Proposed and current reforms to the industry range from better data systems to capture and co-ordinate operating licence records; in-taxi Wi-Fi, 22-seater vehicles on appropriate routes and cashless card payment systems.
Long-term solutions such as exploring electric vehicles and alternative fuel sources should also be considered. But what’s important now is examining the price of fuel in the taxi sector, says Schalekamp.
Nagel, who has advised MECs and ministers on taxi industry reform since 1994, believes the industry needs to become more business-minded and the association model holds back growth. “Business models hold directors and shareholders accountable for their actions, with business rules being more effective in enforcement. When rules are made that affect the pocket and not the politics, they are more effective,” he argues.
Rolland says continuing violence and competition for routes are symptoms of a weak economy. “Stagnant growth of 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 warns. Fuel hikes will add to the pressure.