OPINION | What underlies the impasse in the taxi industry?

Commuters at Bara Taxi Rank on June 01, 2020 in Soweto.
Commuters at Bara Taxi Rank on June 01, 2020 in Soweto.
Papi Morake

The taxi industry debate needs to be taken forward within the broader context of broad-based black economic empowerment, writes Khwezi Mabasa and Yamkela Spengane.

The recent impasse between the South African National Taxi Council (Santaco) and Transport Minister Fikile Mbalula has featured prominently in Covid-19 policy response debates.

Most media accounts focus on the violence, inefficiencies, and driver negligence associated with South Africa's taxi industry over the past 25 years. This dominant narrative is mainly drawn from working-class taxi commuters' daily experiences, and the nature of protests when taxi regulatory disputes arise.

This view captures some challenges in the sector, but it does not present the totality of the public policy challenge facing all stakeholders. It is, therefore, essential to lay out the underlying market structure issues informing the recent taxi industry impasse. We argue that the current debate misses the underlying market stricture factors, which need urgent attention from both the private and public sectors.

The taxi industry debate should be taken forward within the broader context of broad-based black economic empowerment (B-BBEE) and developing South Africa's informal economy. These two themes feature prominently in the recently published Mapungubwe Institute for Strategic Reflection (Mistra) book on B-BBEE and black entrepreneurship.


There are several opportunities for enhancing South Africa's integrated public transport system while simultaneously supporting black entrepreneurship. These opportunities require an evidence-based policy strategy that overlooks the short-term thinking in current debates. This long-term policy strategy must commence with  addressing the structural market failures in the sector.

Several competition policy studies and investigations reveal South Africa's transport market has an unequal subsidy structure. Taxis, which account for 75% of the market share, receive fewer subsidies than other transport modes servicing a smaller portion of commuters. This skewed subsidy structure has significant effects on the competitiveness and pricing in the market.

This market failure is exacerbated by the recent Covid-19 regulations that restrict the taxi operators' abilities to cover operating costs.

The state needs to revisit its subsidy framework based on market dynamics explained in sector competition analyses; however, this new subsidy regime must draw in the private sector, which benefits indirectly from taxis transporting the majority of workers.

Labour market analyses show employees spend just over 40% of their incomes on transport.

The cost of transporting employees who use taxis daily is externalised onto workers and the government only. This does not make sense because large corporations also benefit from worker transportation.

Another significant opportunity lies in connecting South Africa's taxi industry development with the recently announced R700 billion infrastructure strategy.

President Cyril Ramaphosa launched an Infrastructure and Investment Office in the Presidency during 2019, and it is currently embarking on infrastructure investment focused on developing the following network industries: electricity, telecommunications, transport and water.

The government and business should prioritise taxi sector infrastructure when implementing this strategy.

Taxi associations have raised legitimate concerns regarding the lack of sufficient infrastructure, especially in central business districts and suburbs.

Black business and informal sector support measures ought to feature prominently in the multibillion-rand infrastructure plan, and the upgrading of the taxi industry presents an empowerment opportunity for the government.

Improved infrastructure that focuses on making taxis more efficient in transporting commuters will save the economy billions lost in unused hours spent in traffic.

Furthermore, regulatory interventions geared towards streamlining the taxi industry as a core component in the integrated public transportation system can potentially create taxi and auto sector value chain opportunities.

These will benefit several market players such as auto component manufacturers and retailers, auto-mechanics servicing taxis, drivers, marshals, and informal businesses that operate in and around taxi ranks.

Empowerment strategy

For example, auto component manufacturers can gain economic benefits from South Africa's Automotive Masterplan, which binds Original Equipment Manufacturers (OEMs) with local content designations. It sets a target that requires 60% of all auto components used for car manufacturing in South Africa to be developed locally by 2035.

The taxi industry, which is a significant aftermarket auto components consumer, will be an opportune target for the aftermarket auto component value chain that links with steel industries, component manufacturers, retailers and mechanical workshops.

It is important to understand B-BBEE needs to be actionable across all sectors of the economy, formal and informal. A successful B-BBEE empowerment strategy accelerates structural reform and builds on existing black enterprise activities.

This new approach to empowerment must focus on upgrading industries that black people are already involved in and creating further economic opportunities using structured value chain sector plans.  

- Khwezi Mabasa and Yamkela Spengane are authors in Mapungubwe Institute for Strategic Reflection (Mistra) publication on Beyond Tenderpreneurship: Rethinking Black Business and Economic Empowerment.

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