PRICE SETTING– A challenging time for the transport operators in Africa, especially those offering self-informed transport services. In academia we call these services paratransit operations because they operate parallel to transit. Transit refers to western traditions of public transport in the form of scheduled buses and trains. In many African cities and towns paratransit is the tradition.
Many operators use petroleum to fuel their vehicles at the moment. Some have long term deals with petrol stations, others have found cheaper filling hubs; while others may have access to illegal cheap fuel just to keep the operating costs as low as possible and keep commuters moving. Maybe it’s hard to view operators as people with a deeper sense of the world when much of what we hear is violence and conflict. What happened in Mahikeng this month is rather compelling.
Let me start off by describing the regulatory issues. I had just returned from a workshop on regulating transportation, because of some of my interests. One thing that is not discussed in Africa is the operator market. Transport drivers, and owners are a highly misunderstood part of society almost hidden behind unions and associations. This is an issue across all transport modes. The worst thing that could happen is somewhere between Air France KLM loosing over 300 million Euros over pilots striking; and what’s happing with the deadly situation in Lady Smith over route conflicts (taking 61 lives); if not the crises in the so called e-hailing driver industry. What is unique about the relationship between associations in Mahikeng is that operators made an important call for their route:
- One group made a decision rapidly increase prices to R 12 order to respond and reflect increasing fuel prices (mainly from town to neighborhoods). Commuters received approximately a week’s notice.;
- The other group made a decision to keep prices flat at R 10 for their routes (mainly to town through neighborhoods). This group has not announced an increase as yet, and is leveraging on the lower price point visible on all the taxis with a R 10 sticker on them.
From a regulatory perspective this is not uncommon, but may be unique in Mahikeng. Prices have been flat at R 10 for a significant period of time. They do not reflect various service attributes, nor do they vary depending on the travel, waiting and distance commuted. Which are important attributes, but seem to be cross-subsidized between operators and throughout the system. These are very obvious observations to a typical operator. What is fascinating is the lack of conflict. Each operation seems to be happy with the current situation: be it the trip generators in the CBD or the trip generators at Mega City, secondary node near the North West University–pictured above.
From an analytical perspective, the state of the facilities are not suitable for commuters and do meet basic needs– but not with respect to service. I shall discuss this in another piece, but for now: self-regulation is possible in the paratransit sector. It’s been happening for decades, and the only reason why it’s not a headline issue is because there are no bodies to count.
The hikes are different in all towns. Some associations publish hikes and paste them in the minibus taxi vehicles describing all the changes across routes. Others distribute the information verbally, through radio and other media. There are databases of taxi prices and routes in major cities. Oh, here’s another opportunity.
UPDATE– The ride weighs more than usual, since the last time. A hot day in the late 30 degrees (celsius), no shade and barely and cold water for sale–just the usual frozen Cool Time. Much has changed since the tension between the Mega City taxis and the city taxis reacted to petrol price spikes toward October even into November. Local operators kept their prices at R10, through stickers– and now there’s a proliferation of taxis with removable signs indicating “R10” prices.
On route competitiveness became prominent because patient commuters would ignore the unmarked vehicles and opt for the R10 ride. That’s about $0.70 for a decent 15km coverage range. One of my models basically reveal that there’s a degree of cross-subsidy between various distances across areas. At some point I’ll share the structure of the model and some of the underlying assumptions. The preliminary estimate is that the true unit value per trip was about R7.50 and the rest is circulated probably around the distances away from this average. This was in 2014/15. By now it may be much higher, potentially R8.00 or even R9.00 in real terms. A follow up study is necessary to estimate these values and test the validity of the model. Anyway, it’s important to figure these estimates out because while it is important to provide dignified and high quality access and mobility services– the systems upon which these modes rely on are technical, tangible and need to be measured accurately.
While competition on the route is discouraged in the transport regulations here in SA, and in many other countries, territorial or route based assignments can be inefficient. From the observations from these taxi services it’s is clear that competition within routes can be governed by users making “optimal” choices. When commuters indicate that they are not willing to pay more than R10 for a specific trip on average, they are forcing operators outside of this price to bring prices toward the commuters. Particularly because my expectation that demand for services would remain contestant the relative supply of the lower priced services should become saturated at some point. But the clearing effects of users is a fascinating thing to observe, something that bends static ideas of the “equilibrium”– which in reality keeps moving throughout the day, week, month and year across various people and geographies. This is where the universal principles of how competition is allocated and rationed by route, territory or anything become somewhat complicated and specific to the tune and tone of the location.
So, I’ve obviously got much more to do around the topic and a number of unanswered questions still linger. However, between September and December it has become clear that many operators are climbing down the price ladder. Then again, regulations remain largely unprepared for open access to passenger transport permits in the Mobility as a Service environment. How technology and information systems augmented some of the fundamental assumptions deeply rooted in legislation should call for more rigorous attention. If taxi drivers have the humility to advocate for affordable mobility in the face of unit cost rises (and hidden profits/losses), then why would algorithms do the same? Can the algorithms recognize a need for sympathetic prices, payouts to operators/”partners”? Will these platforms be able to distinguish between the value of services and the prices over the willingness to pay? These questions can not be answered by the platforms alone, and there’s much to learn from the underbelly of ethical self regulation grumbling for attention in self-informed sectors like minibuses.
Can a robot be brave? Can it selflessly sacrifice? Can a robot be trained to identify and engage targets, have some sense of ethics or restraint? Will a robot ever be able to distinguish between a child and a small man? If a robot kills an innocent civilian, who is to be blamed?–Eric Schmidt, Jared Cohen in The New Digital Age.
There’s significant opportunity to delve in to these issues with a little more than empirical machinery. Tactical and epistemological issues need to be revisited and explored. I’m of the view that while the minibus services are inconsistent around the country, there are some edges worth leaning in on and learning from. To the marshals and the association, a sense of locality and empathy held prices down for commuters only to come out with a new pricing regime in Mahikeng and Mmabatho which I shall share in more detail some other time.