Category: Land Transport Policy

#201 Options to subsidise our minibus taxi industry

LOOKING UP TO MAPS– Kids use taxi ranks all the time. Here in Polokwane, I watched a boy pause to admire Maps Maponyane towering over the minibus taxi rank. It was brief, but the boy drifted into the shoes, and outfit: faded into the experience and landed back here to his youth. Severely unique experience, which could be what the next generation would say about the future of the minibus taxi industry, if we get it right now.

With great fortune, last night ended off with an interview with the acclaimed eNCA anchor Thembekile Mrototo. The background to the story related to the dual policy statements made by the Competition Commission from its Market Inquiry into the public passenger transport industry and the South African National Taxi Council (SANTACO). The Commission had a press conference today, and published two lengthy reports related to the inquiry. For the media team, their focus was on how the use of the Taxi Recapitalisation can enable the subsidisation of the minibus taxi industry. SANTACO’s position was that a focus on the user subsidy is key and operators should not be subsidised. This was and is the premise upon which the next few points will revolve around. 

Context. For the sake of context, I’ve made some comments on the public transport subsidy recently as a result of a stakeholder consultation. This came from participating in the Market Inquiry and making a submission that went wayward from the terms of reference, then. However, I learnt much of what I share from the ground– the operators and users: some judgemental forecasts were made about what could happen by 2025 if we were serious.

Normatively speaking, the primary justification for an operator subsidy is to enable and contain the employment opportunities in the sector, and keep the families that depend on this income alive and well. For the user to be subsidised (directly or indirectly), enables them to access a scope of society that represents a dignified and equitable share. 

Direct or indirect subsidies matter 

Subsidies are complex, but they require systematic justification for what the authority issuing the subsidy is trying to achieve. A user based subsidy enhances the extent and scope through which people can move and access opportunities, ideas and services. It also enhances the operator: they get pure cash into their baskets and the market should reach a social equilibrium as everyone wins. One submission to the Division of Revenue Act in 2010 from Ghalieb Dawood and Mathetha Mokonyama truly advocates for a subsidy based on the current Social Grant Card, and the transport cost is almost embedded in it. The subsidy goes up to around R50bn per year in 2010, and now it might be much higher.

On the other hand an operator based subsidy is associated with the transportation system— not the activities within it. Infrastructure, vehicles and systems could be provided without a charge and operated by the operators. Here we have taxi ranks, road infrastructure, sheltered taxi stops and other solutions (recall Regional Kgwedi’s call to provide dedicated lanes for minibus? That’s another example). This is where the role of the Taxi Recapitalisation Programme may fit in: providing additional systematic support for the reform of the industry. Recapitalising not only the fleet but the systematic inequalities in infrastructure the industry has endured since the 1970’s. However, SANTACO’s position is important to understand because one must always ask: who will run the unified national ticketing system? How will the cashflow be managed? How will the relationship between the operator and the owner change?

These questions could lead to disaster or a flourishing industry— but the prerequisite is a professionalised sector with the necessary protections for drivers and owners alike. This will also require SANTACO and the National Department of Transport to follow through on the National Taxi Task Team’s recommendations on a hands-on basis; in addition to formulating a new task team which will focus on an inclusive future for the industry in a diversified form. Normatively speaking, the primary justification for an operator subsidy is to enable and contain the employment opportunities in the sector, and keep the families that depend on this income alive and well. For the user to be subsidised (directly or indirectly), enables them to access a scope of society that represents a dignified and equitable share. 

Organisational equity is at the heart of the industry 

Organisational equity is just as important for operators as social equity is for users. SANTACO currently plays the role of institutional and political arms of the taxi industry through the National Department of Transport. They are the custodians of the entire minibus taxi industry in conjunction with the National Taxi Alliance (NTA). SANTACO is built through this political arm, a corporate entity Taxi Choice, which serves the business interests of the political arm. Hence the reach of the sector can go well beyond the reach we discuss now. Organisational equity means that local and regional associations need to form business arms through cooperatives or other business structures (holding companies etc.). In this format, they too have the room to move between various business opportunities that could enable them as a collective to leverage on developments within their interests. This comes with some risk. New entrants, may experience more corporate and regulatory limits to their plays over the violent actions seen over the years. One step further: according to industry insiders, the capital value within the taxi association is higher than the owners and associations can imagine. They just don’t know how much they have in their pockets. It is the role of SANTACO to politically enable associations to become businesses, and administrators. This is crucial for the future of the industry. If this does not occur, the organisational inequity would perpetuate itself until SANTACO’s political and institutional power is associated with limiting the industry’s growth unless if they have a stake in that undistributed growth. This is a severe risk to their legitimacy in the political front. I’m yet to read the Competition Commission’s report in detail, so it’s hard to tell if this is within their narrative too. However, what they did advocate for is the devotion of functions: this needs to happen even in the taxi industry too. Or else, a parallel political economy may form itself at scales greater than municipalities have the capacity to manage. However, if done right, owners, operators and associations will have business interests and be in a position to express these in transport contracts, franchises, local industry partnerships and other forms of development. Gail Jennings and Roger Behrens once wrote about ‘the investment case’ for minibus taxis. Their point is that the scope of investment goes well beyond what we think transportation is, but more toward how mobility is a service that is experienced and has value in so many levels.

Does the recapitalisation implied in the Commission’s statement also mean organisational capital? Who will nurture the local associations to go beyond attempting to contract for bus services, and instead serve as they are but better? How will the new technologies influence the localisation of the industry? Will the local model enable greater transparency and efficiency over a centralised model? 


Thank you for reading this piece, and big thanks to the eNCA team and Thembekile Mrototo for his sharp line of questioning. There’s much more to share on this topic, but for now, tune in for more on this issue. There are a number of other issues coming up, some you’ve thought of, others you have not. Let me know if there’s something you wish to see discussed here.