Ever since the 1990s, government has tried in various ways to bring the taxi industry into the formal economy. Many such attempts have led directly to taxi violence, and most have met with only limited success.
The minibus taxi industry – the subject of my report this week for the Institute of Race Relations (IRR), South Africa’s Minibus Taxi Industry, Resistance to Formalisation and Innovation – accounts for more than two thirds of all public transport trips, according to the most recent National Household Travel Survey. It conveys 3.65 million people between work, shops or schools and homes that are often far-flung, thanks to Apartheid-era spatial planning that created vast residential townships on the peri-urban fringes of cities and towns.
The government enables taxi associations to act as cartels by issuing formal operating licences only to association members, and restricting licensed taxis to operate only on routes approved by the associations. This enables taxi associations to exclude would-be new entrants to the market simply by denying them membership.
Despite cartel pricing controlled by taxi associations, taxis remain fairly affordable compared to other modes of transport. Government pays large subsidies of between 50% and 65% to bus and train services, without which taxis would be the cheapest mode of transport available by a substantial margin. They also reach far more people and are much more flexible.
The Taxi Recapitalisation Programme has left many taxi operators out in the cold, and increased fares among those who did participate. The programme’s attempts to impose labour standards in the industry met with resistance from the very same drivers they are meant to protect, since they are loath to give up the ability to work extra hours to pad their take-home pay.
Bus Rapid Transit systems have caused conflict with taxi drivers and owners who feel they’re being pushed off profitable routes.
Besides improving public transport systems and incremental taxi industry formalisation, there is a third way to engage the minibus taxi industry. Advocated by several researchers, but hitherto unpopular with government, it builds on the observation that taxi operations suffer from overstated criticism and are more efficient and safer than generally perceived.
Described by transportation and urban planning expert Robert Cervero as a policy of recognition rather than regulation, the “third way” favours supporting and upgrading minibus taxi services instead of introducing new, competing, and subsidised bus systems. The goal then would be to deregulate market entry to allow free competition between operators, with government regulation restricted to issues of public safety such as roadworthiness and driver behaviour.
Deregulation and free competition lead to reduced fares, reduced overall public expenditure, improved service levels, greater innovation, and a greater responsiveness to the needs of passengers.
Free competition is not without its problems. Resolving these would require a paradigm shift in how government approaches the taxi industry. Instead of pandering to the power of taxi associations that operate like cartels, and co-opting them into the process of issuing operating licences, it would have to actively police anti-competitive practices, including violence that asserts “ownership” rights over routes.
“Operators who think they can make a profit should ideally be given a licence and allowed to enter the market, and they should be protected from violence by the state,” wrote Andrew Kerr for the World Bank. “However, given the history of violence between associations, which is often the result of competition over routes, the government seems reluctant to make licences more easily available and encourage entry beyond that deemed sufficient by taxi associations.”
Wrote Mark Ingle, a research associate at the Centre for Development Support at the University of the Free State: “Instead of trying to wrest ownership of the public routes commons from the strongmen for its ‘own’ allocation, the state should be keeping these routes open for the free use of its public, including aspirant taxi entrepreneurs.”
He favours a combination of deregulation and better policing. “The state’s current approach, if it has the enforcement capacity to give effect to it, would seem to sound the death-knell for a market-driven taxi industry.”
Cervero advocates reducing regulations in order to foster an array of transport services at different price points, which he calls “economies of scope”, in contrast with “economies of scale”. Market distortions, such as supplier-side subsidies for trains and buses, should be eliminated, in favour of user-side subsidies. A voucher system would stimulate fair and equal competition among different modes of transport. This would also reduce the conflict between private paratransit and formal public transit services.
“It is, however, evident that this approach [would] necessitate a comprehensive review of current policy on the regulation and integration of paratransit,” wrote Herrie Schalekamp of the Centre for Transport Studies at the University of Cape Town.
Government attempts to formalise and regulate the industry threaten many marginal taxi operations. The taxi industry itself feels that its business is “under siege”. Interventions to improve the quality and safety of the industry can succeed only if they understand the needs of passengers, drivers and owners.
Instead of sidelining the free-wheeling taxi industry in favour of centrally planned transport projects, or trying to co-opt it into the formal sector, government should respect the contribution minibus taxis have made to mobility in South Africa, and place them front and centre of its public transit policies.
Coupled with my report for the IRR on the taxi industry is the following three-part video series:
- Part One – A Day in the Life of a Taxi Boss
- Part Two – On Taxi Drivers, Marshals & Traders
- Part Three – Interview with Ivo Vegter
The views of the writer are not necessarily the views of the Daily Friend or the IRR
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