SANTACO

THE FUTURE OF THE TAXI INDUSTRY

Paper prepared for Discussion with Parliamentary Portfolio Committee on Transport

18 August 2004

(This document is a discussion paper only and must not be regarded in any way as a statement of SANTACO policy)

Preface

This paper briefly describes the views of SANTACO for the purposes of discussion with the Committee.

It must not be regarded as a statement of SANTACO policy, However, the matters it considers have in recent months been extensively workshopped within the SANTACO structures, and the views expressed have been agreed in principle by the National Executive Committee.

1. Overview

The taxi industry of 2004 operates very much in the same way as it did 30 years ago, when the combi-type vehicle was first legalised.

Current government policy and legislation makes it inevitable that there will in the near future be changes to that established pattern. In broad terms, authorities will decide what services are to be provided, and will contract with operators to provide the services.

Such change poses a threat, but it also offers opportunities. Government is signalling strongly that it wants to see the taxi industry begin to transform itself into a more broadly-based transport business, in order to take advantage of those opportunities.

SANTACO accepts the good intentions of government, but cautions that :

  1. there must be safeguards to ensure that the process of transition does not lessen the size of the investment by today's taxi operators, but rather serves to increase it; and that
  2. the time, effort and resources required to ensure successful transformation must not be underestimated.

  

 

2. The Threat

The White Paper on National Transport Policy was published in September 1996. It included these statements :

"Government recognises public passenger transport as a basic need but wishes to ensure that it is provided efficiently so that public resources are used in an optimal manner. The public passenger transport system in South Africa will be based on regulated competition

"Where public transport services require government funding ……………. competition will take the form of tendered contracts (competition on routes or networks will then be precluded)."

Almost all routes with heavy passenger volumes currently have either a subsidised rail or road service together with a parallel taxi service.

The policies in the White Paper were translated into law by the National Land Transport Transition Act of 2000. The Act requires that planning authorities produce a range of transport plans. These include an Operating Licences Strategy. In terms of the Act :

"An Operating Licences Strategy must contain the authority's policies and strategies in relation to (inter alia) :

The results are already being seen. Planning authorities are producing Interim Transport Plans based on Operating Licences Strategies which show substantial reductions in the number of taxis (30% reduction in the current Johannesburg plan, for example.)

These plans are being produced wholly in line with the NLTTA - but they contain the seeds of unrest, because they deal with only one part of the process of transition. They represent 'the threat'.

If this process were allowed to continue unchecked the taxi industry would shrink to a fraction of its current size.

SANTACO cannot allow this to happen. In the interest of its members it must and will oppose this crude policy and strategy.

We suggest, though, that it is not in the interest of broader government policy. At current replacement values, the industry represents an investment in the South African economy of some R15bn. The investment is owned by tens of thousands of individuals, all from previously disadvantaged communities. This must surely represent the ideal example of broad-based black economic empowerment. It should be encouraged and assisted to expand.

 

3. The Opportunities

As it happens, government policy does provide the opportunity for this to happen.

The 1996 White Paper said this :

"Regulated competition will mean that the minibus-taxi industry will have to be formalised and measures introduced to enhance its economic viability. Minibus-taxis could form legally registered businesses, for example cooperatives or companies, or be registered associations.

"Minibus taxi business may compete for the awarding of contracts by transport authorities. Financial and technical assistance will be offered to minibus taxis to enable them to obtain permissions and/or contracts either on their own or in partnership with bus operators."

As we have noted, the policies in the White Paper were translated into law by the National Land Transport Transition Act of 2000. We are now in the second half of 2004, but up to now there has been almost no sign of action on these important matters.

That seems to be changing. Government has made its intentions clear in a number of recent speeches by Minister Radebe and provincial MECs.

In his budget vote speech to the National Assembly on 17 June 2004, Minister Radebe said this :

"A review of the public transport system is underway. Factors to consider include the mis-match between how the subsidies are allocated……… We also need to consider alternative means of delivery and payment."

For reasons which are described later in this paper, SANTACO was pleased to note that a review of the public transport system is underway. We do have a concern that we have not been asked to contribute to the review. It seems to be an internal matter within the Department. We are sure, though, that the intention is to publish the results of the review as a discussion paper.

We were also very pleased indeed to learn that the subsidy system is to be reviewed. At present, bus and rail operators get billions of rands in subsidy every year. The taxi operators who carry by far the majority of commuters get nothing. The situation is clearly indefensible.

Some details of government policy became clearer in the budget vote speeches of the provincial MECs responsible for transport. We will quote from two of them.

On 28 June 2004 MEC Ignatius Jacobs said this in his address to the Gauteng legislature :

"The taxi industry is still struggling with the right formula in order to be organised on sound business principles. We have to work for the recognition of the sector as a business sector, and encourage the organisation of taxis as a transport industry, and help grow the owners as business people. It is in this light that we are looking for better ways of handling the issue of subsidies for public transportation."

We see the key words as being to " encourage the organisation of taxis as a transport industry". It seems that government sees this as a necessary element of the participation of the taxi industry in the subsidy system

Two weeks earlier, on 15 June 2004, MEC Skwatsha told the Western Cape legislature that :

"It is my intention to see the minibus taxi industry have a substantial participation in the subsidised scheduled services. This participation will require capacity building in the industry. It will also have to form part of the transformation of the industry from primarily focusing on minibus taxis, to dealing with all modes of public transport"

Other MECs have made similar statements.

SANTACO welcomes this clear intention to assist the taxi industry to transform itself into a broader transport business. We do have some reservations about whether the scale of the task is fully understood, and we are concerned that it may be used to delay the participation of the taxi in the subsidy system.

It is generally accepted that the first ten years of democracy were in many ways a preparatory period, and that government is now firmly in 'delivery' mode. SANTACO, too, has had to spend the three years since it was formed in September 2001 getting itself organised and dealing with the very important matter of recapitalisation.

It is now time for both government and the leadership of the taxi industry to develop strategies for the future of the industry and its multi-billion Rand investment in the economy.

 

4. The Transition Process

The process of transition will be long and complex because in essence, it requires the present informal sector taxi operators to become part of the formal sector transport industry.

This may not seem like a revolutionary vision, but it represents a huge change of mind-set for the taxi owner. He and she has grown up in an informal industry, where individual ownership and operation is highly prized.

The changes will have to be handled with great sensitivity. The benefits can be clearly explained - development of new markets and access to the subsidy system. But there may well be opposition to the required change to a deeply entrenched and traditional means of operating.

Let us consider just two aspects of the change.

  1. MEC Skatshwa refers to the "subsidised scheduled services". Taxi operations are unscheduled; they operate according to demand. The management and supervisory skills needed to operate a scheduled service are very different from those of the rank marshal.
  2. A contract offers guaranteed payment by the authority. But it also requires the operator to ensure the operation of the service exactly in accordance with the contract. Taxi operators have little experience of such exacting conditions of operation.

SANTACO believes that there are two critical elements in the process of transition .

Time

Any attempt to rush the process will end in failure, recriminations, and ultimately a longer period of transition.

The programme for change must allow for :

 

 

Capacity Building

This will be the key to successful management of the process of change. It must, though, mean more than simply holding training courses or engaging consultants to explain the Act or help taxi groups to fill out tender forms.

There will be a need for :

We incline to the view that training leads to empowerment; but mentoring and coaching leads to enablement - and that this is the key to successful transformation.

 

  1. Possible Future Operating Structures

A planning authority which wishes to contract with a taxi group to provide services will find it difficult to deal with a large number of individual operators.

There may well be a need for some form of intermediary - owned and controlled by the operators - which will enter into the contract with the authority, and then sub-contract the actual services to the operators. The intermediary will be responsible for ensuring that the services are provided in accordance with the contract.

Three structures suggest themselves as possible intermediaries :

The Association

This already exists, but it is a voluntary body which may find it difficult to undertake the complex managerial role of the intermediary.

The Company

A proprietary company could be formed to act in this role. The main question would be - who are to be the shareholders?

The Transport Cooperative

The Cooperatives Bill now in its final parliamentary stages makes specific reference to a "transport cooperative". This should not be confused with the 'taxi cooperative', a trading body intended to take advantage of the buying power of members. The transport cooperative will be formed to operate transport services.

Whatever the structure adopted, it will develop many new jobs - managers, supervisors, administration clerks, technicians, and others.

 

6. Subsidy

We are pleased that government has publicly accepted that the present subsidy format is untenable.

Minister Radebe announced in his budget vote speech that the situation is being reviewed, with the clear intention of developing a fairer system which allows all operators to participate and which will benefit all commuters, irrespective of the mode they use.

SANTACO is, though, concerned about the length of time that may elapse while a new system is developed and implemented. Our experience - with taxi recapitalisation, for example - leads us to fear that it may take years.

Some simple interim system must be considered. The taxi operator cannot be asked to continue for years more to accept the unfair nature of the present situation.

 

7. A New Transport Policy

The taxi industry is experiencing very great difficulties with the workings of the National Land Transport Transition Act 2000. There are problems with the Operating Licence Boards, the Registrars, and much else.

One reason is that the Act is extremely complex. This places a great strain on the abilities of government and administration to implement all the many parts, yet all the parts must work together if the Act is to be successful. They clearly are not working together.

The Act stemmed from the 1996 White Paper. That in turn had been at least two years in the making. We believe that any policy which is 10 years old is likely to be outdated. This one certainly is. Implementation is in disarray. The problems cannot be dealt with in individual bits and pieces.

SANTACO believes that it is time for a complete review of land passenger transport policy, and the replacement of the transitional Act by one which recognises the realities of the South African situation as we begin the second decade of democracy.

 

8. Conclusion

SANTACO agrees that the taxi industry will have to accept change in the way it operates.

We are gearing ourselves to the development of strategies which we will put to government.

A draft policy document in this regard already exists. We want offer the ideas in it as our contribution to the new transport policy which we believe is necessary.