When Transaction Capital issued its unaudited interim results more than a month ago it noted that while most operating metrics had improved beyond prepandemic levels, numerous headwinds had “suppressed commuter activity”.
These headwinds included the slow recovery in key sectors from which commuters are drawn, civil and taxi unrest in 2021, fuel price increases and the recent floods in parts of KwaZulu-Natal and the Eastern Cape. Transaction Capital expected that minibus taxi operators would increase their fares in the near future. That “near future” now seems to be here.
Commuters will be confronted in July by bigger than usual annual taxi fare increases, which alongside rising food and other administered prices (rent, property rates, electricity) will visit untold misery on many SA households.
Ultimately this will also be seen in demands for higher wages or — more ominously — protest action that is even more intense than the demonstration by union federation Cosatu and others in eThekwini on Friday.
“Even the amount of money we are charging currently”, said SA National Taxi Council provincial office manager Sifiso Shangase on MetroFMTalk in May, “does not give us the profit we need to be able to sustain the business”.
Shangase also indicated that its decentralised structure meant some taxi associations, such as that in KwaNdengezi, an area heavily affected by the floods, had already increased their fares before the July annual increase. The taxi industry, which has increased fares by only about 9.3% between 2013 and 2020, had frozen their price rises for humanitarian reasons.
Interest rates
However fuel prices are much higher now than they were in 2020, and so are interest rates, which are a critical component of the price commuters ultimately pay. The price of credit to acquire a minibus taxi influences not only the final commuter price but also the pace, scale, and frequency of conflicts over routes, which influence the profitability of operations.
Higher interest rates, saturated routes and lower commuter numbers make these conflicts more fractious. The other implication of a decentralised structure is the variety of rules to entry to associations that operate in the market, which can saturate the sector and influence operator profitability.
“We need to regulate, control and then reduce the number of people that are operating because that on its own is one other factor that we have identified as critical in terms of instability and conflict within the industry”, Sibiya said.
These challenges have also allowed elements in the minibus taxi industry to intimidate drivers with more than two passengers in their private vehicles, as they defend what they feel is their “market” — people who may be opting for even more informal transport nodes and lift clubs as the passenger rail sector totters along, handicapped by operational failures at Prasa and widespread asset stripping
Policy responses have to frame minibus taxi support as not only about formalising the sector, and regularising routes, entry into associations and financing. But also about using support to the sector as a means of cushioning the effect of externally driven price increases on poor households.
Deprivation index
This can be done through short-term debt relief measures for operators in return for price freezes, investment in taxi rank real estate to diversify incomes of operators and economic opportunities alongside the sector.
The targeting and sequencing of these measures could be prioritised via the “transport deprivation index” developed by the Gauteng City-Region Observatory, for instance, considering areas with least access to minibus taxi and bus services and the introduction of routes in informal settlements via the informal settlement upgrade programme.
One would imagine these interventions also fall squarely within the township economy interventions being pursued by Gauteng and other provincial administrations, and may provide a policy testing ground for mutually reinforcing interventions that provide stimulus to microenterprises in the townships, mitigate costs for drivers of poor households, and build organisation and a semblance of economic planning and conflict management in the sector.
The alternative is too ghastly to contemplate — conflict and intimidation, runaway price rises, further minibus taxi repossession, empty taxi ranks and the misery of cold walks to work for many SA commuters.
• Cawe (@aycawe) a development economist, is MD of Xesibe Holdings and hosts MetroFMTalk on Metro FM.
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