Shifting the paratransit value chain

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Snapshot of a major taxi rank in Klerksdorp, North West Province, South Africa. Surrounded by outdoor resturaunts, rubbish containers and full of car washers.

This piece summarises a presentation and workshop offered at the Rustenburg Transport Conference and Exhibition initiated by the Bafokeng Taxi Owners Association in October 2017. The event was arranged by Moripe Holdings and sponsored by various entities including the Transport Education and Training Authority

Limited Time to Respond

“This period, the coming 15 years is really the trickiest part in getting investment in cities right because of the lock in effect. What will be invested, planned… and implemented…now will lock us in for another 100 to 150 years. So this is that unique window of opportunity for getting things right.”- Sameh Wahba, Global Director for Urban and Territorial Development, Disaster Risk Management at the World Bank– 2015

Sameh, above, argues that the time for action is only in this short window between 2015 and 2025 for laying the foundation for action. In terms of transportation and logistics industries, the impact and role of technology, systems, data and infrastructure such as block-chains will be significant. At the same time, environmental sustainability, industrial change, carbon taxation and incentives for public transport and electric vehicle manufacturing are playing a prominent role in investment decisions. The role of education authorities, sector austerities, and post-school institutions may be to capacitate existing and future stakeholders to act, manage, innovate and respond to a complex period of development. Currently, the importance of the Competition Commission inquiry on Passenger Public Transport Competition should not be ignored as it will have significant implications for the regulation of transportation services, systems and industries.

Market Evolution
There is a short window of opportunity for effective opportunities to grasped in the transport industry.

The taxi industry is among largest organisations of people, equipment, services and facilities. Established as a people’s service, the industry has evolved through various phases of ranging from broader competition to deeper self-reflection. This discussion note describes practical avenues of change at a strategic level with deeper macroeconomic questions. It is more of a discussion document than an academic report and should be used and considered as such.

Business as Usual is Expensive

The industry evolved from filling a market gap, as in many other countries, to leaning on public sector support to enable reform. Transit services for large passenger volumes are essentially important for metropolitan regions and intermediary towns anticipating high and dense population growth and land-use. However, the last-mile and interconnection across various locations exposes deeper service gaps in the minibus taxi industry some may be supported through technology, new business models and others are supported by institutional arrangements and corporate identity making.

Business as usual is not a valuable proposition under circumstances of digitisation and rapid market development. Between 1977 and perhaps to date, the industry has been in a business as usual environment. Many of the actions have been strategically laid out, and responsive to various policy, industry and fiscal interventions. 2005 and 2015 are markedly periods wherein business was becoming more and more unusual through the entrance of more operators and rapidly growing network reach in response to urban and settlement sprawl.

The most evident challenge and opportunity today is the integration of technology in both operations and service design. Driver allocation, vehicle sequencing and demand responsiveness are operational elements in the technology space. Service design refers to elements in technology through which users interface with: for example mobile applications, television based notifications of trip departure times, SMS based booking services and online web-site based solutions. There are service elements that cut through his such as electronic ticketing which may be a pay point, cellular or biometric transaction.

The most evident challenge and opportunity is the integration of technology in both operations and service design.

Policy changes are evident in terms of the manner in which integrated public transport networks are developed. For instance, a change in the definition of Integrated Public Transport Networks has now been alluded to including and providing for the priority treatment of transport services. This is not limited to the traditional scope which leaned chiefly toward Bus Rapid Transit systems. The emerging policy trends, and recent reports indicate a deeper change in the public transport space in order to become more inclusive—rather than replicative. The implications are that there are emerging avenues for financing public transport services, and developing appropriate networks. Ranging from digital currencies, to value capture (i.e. owning transport interchange property and renting it out to commercial companies).

The Minibus Taxi Economy

There are particular complexities related to market entry on a macro level. At operational level the industry is regulated directly and indirectly. Potential issues and opportunities are found in the mesoeconomic value chain and the vehicle consumption market. Significant volatility and vulnerability to macroeconomic circumstances is evident in the industry. The figure below attempts to illustrate the complex web of activities influencing various decisions—which within themselves are subject to external influences.

A look into the industrial development; value chain; industry and monetary policy fluxes may provide an eclectically useful view of the subject matter.

Macroeconomy of Taxis
A different approach to taking action in transport requires a service, industry and systems focus. Details of this concept are in a paper titled ‘Parantransit Mesoeconomy: Control Measures from the Supply Side?’

An approach to transport planning that transcends traditional norms is necessary—operators and industry stakeholders need to grasp this deeply. Predominantly microeconomic approaches only account for the most immediate and visible element of the taxi industry in general. However, a look into the industrial development; value chain; industry and monetary policy fluxes may provide an eclectically useful view of the subject matter.

Systems

There is evidence of vertical integration, meaning the consolidation of activities unimodally within the industry; and horizontal integration toward multiple transport modes, services and technologies across the transport sector. For the purposes of ease, Corpratisation is used in this document to describe registered entities in the form of companies, non-profit and non-government entities aimed at manifesting vertical, horizontal and multi-dimensional avenues of development across the value chain.

Intra Market Chain
Organise the value chain in a sustainable manner in order to gain appropriate, sustainable and effective access to the macroeconomy.

Formally organised groups of operators and owners provide the basis of contractual transport service opportunities in the Integrated Public Transport Network arena. This may take the form of appropriately net or gross contracted services that are route, area or even value based. At the same time, it opens the industry up to partnerships with other corporate entities that provide technology, marketing, service design and public engagement platforms for the industry.

However, the scope of value in the form of traditional corpratised entities does not easily manifest if the players are not positioned in such a way that they move effectively toward strategic multi-modal and multi-industry opportunities.

Key examples of opportunities include:

  • Partnerships with entities like DHL for long distance high frequency small package deliveries.
  • Value chain industries such as vehicle oils, tyres and other componentry manufacturing.
  • Electricification of minibus and midibus vehicles in an industry based recapitalisation programme.
  • Property ownership and value capture to support and fund associations, entities and other paratransit market related activities.

Municipal Readiness

Municipalities are essentially built to devolve transportation functions. Most importantly, the representation of National, Provincial and District level interests is crucial. There is an emerging lurch toward subsidising minibus taxis, which reverberated in parliament recently–a song long sung by the public and other studies.

However, true points of contact with travel and mobility related issues is found in the local municipal space. Hence cascading transport functions to local municipalities may enable a greater local level of action, relationship and engagement.

This is the premise behind establishing transport components in the North West Province. Crucial to this is the development of active, and living contact points of engagement, interaction and development with the ability and capacity to build relationships. The relationships built at local level are fundamentally broad. A narrow few is to coordinate planning—a broader view involves “implementative” actions, deep partnerships and agency building behaviour.

Closing Remarks

Business as usual is not an appropriate approach to the 21st Century transport system (especially with the 22nd Century in mind). The minibus taxi industry is broad, complex and deeply ridden with complexities. Municipalities are ready to develop intimate, action based an implementative relationships. However, every stakeholder needs to champion some sense of responsibility. Education institutions are ready, viable and vibrant partners in the long term development, sustainability and evolution of the taxi industry at large. Equitable and fair partnerships between the paratransit sector and the private sector with municipal regulation or at least monitoring, may be crucial to protect the interests of this sector, while opening it to further development (not just growth). In the advent of financing, subsidy and operational reform narratives emerging and gaining prominence against the backdrop of affordable housing–new questions need to be asked about the sector, not just the industry or the operator alone. 

A fundamental challenge emerges from managing the world’s shift toward shared mobility, and where leveraging on this is possible the minibus taxi industry may play a catalytic role. The process has already started with small enterprises entering the minibus taxi industry game and revealing a new gateway. Various application platforms providing flexible services are gaining traction in mobility information technology (i.e. GoMetro Pro, WhereIsMyTransport). There is a vast array of literature available on paratransit financing, operations and design. One may read my full blog on the subject here and check on these books below:

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