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Taxi Industry Millennium Business Indaba 2000
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Speeches and Media Release
 Provincial Treasury, Economic Affairs, Environment & Tourism

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EASTERN CAPE PROVINCIAL GOVERNMENT
 ADDRESS ON BEHALF OF MEC GODONGWANA
 AT THE BUSINESS INDABA 2000
 ON 27 JULY 2000


THE ROLE OF THE TAXI INDUSTRY IN THE SOUTH AFRICAN AND EASTERN CAPE ECONOMIES

The taxi industry in South Africa has grown from a few hundred 6-seater Valiant sedans in the late 1970s, to more than 80 000 10- and 16-
seater mini-buses in the early 1990s, and to a comprehensive fleet of over 120 000 vehicles in 2000.

This significant growth took place despite early restrictions and attempts by the previous regime to stifle the industry. It survived and 
flourished because it met a clear need for accessible and affordable transport facilities amongst black communities in South Africa.

The worth of the industry is substantial. The capital invested in taxi vehicles alone amounts to several billion Rand, which is renewed and 
sustained every year. The industry’s annual expenditure on fuel, tyres, servicing, repairs, maintenance and other associated operating 
costs amounts many hundreds of millions more each year.

The size of the industry has enabled it to enter into deals and contracts for its requirements, and there have emerged a wide range of taxi 
organisations that represent the interests of the industry all over the country. This, in itself, generates even more expenditure in the 
economy.

The taxi industry also contributes directly to the growth and effectiveness of the economy as a whole because it transports more than 60 
percent of workers to and from work every day; and it also provides a valuable service in terms of medium- and long-distance trips over 
week-ends, and during holiday periods. The industry supports over 200 000 economically active people, and is the single largest black 
economic empowerment initiative in the country.

Thus, there is no question that the taxi industry plays a most significant role in the South African economy, and in the economy of the 
Eastern Cape.

The difficulty appears to lie in the extent to which the un-regulated circumstances of the taxi industry have led to situations of neglect 
of vehicles, a disregard for basic road and passenger safety requirements, unbridled competition for taxi-turf in the form of routes and 
ranks, and a tendency to resort to violence and disruption in order to secure advantages.

It is these circumstances, together with a clear acknowledgement of the value of the taxi industry for the economies of the nation and the 
province, that have resulted in recent initiatives by the state to introduce some measure of order and regulation into the industry.

The trend towards regulation has been based on extensive consultation, and the regulatory intent is supported by the majority of the 
industry’s operators and organisations. This was emphasised by a recent COSATU statement, which emphasised that "a safe, affordable and 
orderly public transport system is in the interests of all commuters and road users, and the taxi industry was no exception". The statement 
indicated, too, that COSATU believes that the "current action in this industry is ill-informed and is being driven by opportunists who do 
not have the long-term interests of workers at heart".

Whatever the causes of the disturbances in the taxi industry might be, it is imperative that be brought to an amicable end as soon as 
possible. Such actions impact negatively on economic growth prospects, because they create an image of instability; and they are quite 
unacceptable in terms of the loss of innocent lives. Add to this the fact that the present complement of between 120 000 and 130 000 
minibus taxis have an average age of around ten years, and are responsible for 15 percent of road deaths in South Africa, and the 
imperative for urgent action becomes even more evident.

The initiative towards formalising the taxi industry stems from the final recommendations of the National Taxi Task Team, which were 
accepted by government in 1996. This represents a recognition by government that the taxi industry is a formal part of the public transport 
system; and, as such, it should be required to comply with fundamental principles of democracy, peace and unity within the industry. It 
also means that all taxi operators should be required to commit themselves to the development of a sound industry, based on accepted 
business principles, which includes the payment of taxes to the Receiver of Revenue!

A key aspect of the restructuring and revitalisation of the taxi industry lies in the Taxi Recapitalisation Project to which the government 
is committed. This involves the replacement of the industry’s current 120 000-odd aging taxis with a fleet of 85 000 new 18- and 35-seater 
vehicles. This is an enormous undertaking that has significant logistical implications, but also brings with it major opportunities for 
economic growth and job creation. The project will mean an investment of more than R 3 billion over a five year period, and will bring 
about savings of many millions more through improvements in the efficiency and effectiveness of the taxi industry, including the safety and 
well-being of the passengers that it carries.

The recapitalisation project has been endorsed by the South African Taxi Council (SATACO), which is the industry’s statutory umbrella body, 
for three main reasons: the safety, reliability and affordability that the new system will bring to commuters and to the industry as a 
whole.

The recapitalisation process represents a joint initiative underwritten by the Departments of Transport, Trade and Industry, Minerals and 
Energy, and Finance, acting in partnership with the taxi industry through a Memorandum of Understanding concluded with SATACO in May 1999.

The Request for Proposals from competent vehicle manufacturers was issued in September 1999, and resulted in 14 bidders who submitted 
proposals to manufacture the new vehicles. Eight of these bidders emerged from the stringent first-round evaluation process, and this was 
subsequently reduced to six short-listed bidders. In January 2000, the Minister of Trade and Industry announced the following short-listed 
bidders:

* Africa in Motion (AMC), which is a South African producer, based in Gauteng, and has made submissions for both the 18- and 35-seat 
vehicles;
* Daimler-Chrysler South Africa (DCSA), based in East London, which has also offered the 18- and 35-seater products;
* The Gaz Joint Stock Company, based in Russia, which is offering only the 18-seater model;
* Iveco South Africa, which is part of the Fiat group, and has offered both the 18- and 35-seater options;
* The Kwoon Chung Bus Holding Company, based in China, and which has proposed a bid for the 18-seater model; and
* The Indian conglomerate, Tata, which has also offered both the 18- and 35-seater versions.

The government has expressed a preference for local manufacture, although this will be guided by economic sense because certain components 
will inevitably need to be imported, at least initially. There are clear opportunities, however, for the selected manufacturer(s) to work 
together in order to achieve the levels of economies of scale that will warrant the local manufacture of components.

Initially, it was intended to announce the final contract winners in July 2000, and to make allocations to two, or possibly three, bidders 
in order minimise the possibility of monopoly control of a potentially lucrative industry. However, it has subsequently emerged that the 
announcement is not expected before August 2000, and that the new vehicles will begin to appear on the roads by January 2001. Given the 
complexities associated with the final decision, and the possibilities for various combinations amongst the short-listed bidders, such 
delays in the announcement are probably to be expected.

Moreover, the technical specifications for the new taxi fleet are demanding, and probably require equally demanding strategic 
consideration, by both the bidders and the government. Some of the specifications for the 18- and 35-seater vehicles include the following:

* Diesel powered, with wheelchair access and smart-card vending machines;
* Fare collection should be convenient and cashless;
* Insurance and maintenance plans must be included;
* The regulations of the SABS must be adhered to;
* The life of the 18-seater should be limited to four years;
* The life of the 35-seater should be limited to seven years;
* Vehicle manufacture should include local components, establish local assembly facilities and use local labour; and
* Vehicles should be fitted with vehicle-tracking systems.

However necessary the delay might be, though, it is imperative that a decision should be announced sooner rather than later, in the 
interests of transparency and in beginning the process of removing unroadworthy vehicles from our roads.

It is not anticipated that existing taxi owners will be disadvantaged by the recapitalisation programme. The initial replacement process 
extends over four years, and the government’s plan includes a contribution of between 20 and 30 percent of the cost of the new vehicles, 
through the proposed scrapping allowance, and owners will have access to appropriately structured financing at preferential rates for the 
balance of the cost.

The process involved in securing the transition to a safer and improved taxi industry appears, at first glance, to be complicated and 
cumbersome. However, in the light of the intricacies of ownership verification and the need to guard against people taking advantage of the 
scheme, it seems necessary that suitable checks and balances should be an essential part of the process.

A survey conducted by the HSRC in March 2000, indicated that 60 percent of a scientific sample of adult commuters and non-commuters 
approved of the recapitalisation programme, whilst 28 percent were opposed to it and 12 percent had no specific opinion. Amongst the 
respondents’ reasons for approving of the programme were increased commuter safety (38 percent), better comfort (22 percent), a reduction 
in crime and violence (13 percent), and increased government control over the industry through recapitalisation (6 percent). The majority 
of those opposed to the project believed that it would increase unemployment.

Clearly, the challenge is to demonstrate that the effects of the recapitalisation programme will not lead to widespread unemployment. There 
are a wide range of potential advantages and opportunities in the proposal, but it will take initiative and imagination to identify and 
develop these into constructive new ways of working in the industry. For example, the proposals for forming co-operative establishments to 
manage and control the industry are particularly innovative and should be thoroughly explored.

The simplistic argument that replacing 126 000 taxis with 85 000 new ones will leave 41 000 drivers without a job, is not based on a 
logical or innovative consideration of the implications of the recapitalisation programme. On the contrary, it opens up significant new 
opportunities in support, service and supply industries that will provide access to new, better and more sustainable jobs. Much depends on 
ensuring that the process is conducted in a spirit of co-operation and joint endeavour towards an improved taxi industry.

Finally, if one of the contracts is awarded to an Eastern Cape manufacturer, it will provide a significant boost to the job creating 
capacity of our industrial sector, and will contribute towards a more sustainable livelihood for many unemployed workers and their 
families.

Delivered by: Bill Davies, Programme Co-ordinator, Research, Policy Planning and Information Systems, Department of Transport

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