Panel vans, illegally converted into mini-bus taxis, may have left financial institutions which provide the taxi industry with finance exposed to the tune of R420-million.
This is according to Lee Dutton, executive director at the International Vehicle Identification Desk (IVID).
The panel vans pose a serious risk to commuters because they don’t have sufficient roof support or seat anchorages.
It is estimated that about 4 000 illegally converted panel vans of various makes operate as taxis on South Africa’s roads.
The IVID first picked up the anomalies late last year when it discovered that panel vans, particularly Toyota Quantums, were being sold by non-franchise vehicle dealerships to taxi operators as new vehicles, says Dutton.
Further investigations revealed that a number of “middle-men” bought the panel vans, which were then illegally converted into taxis without meeting the necessary safety standards required for a recapitalised taxi.
The vehicles were registered on the department of transport’s e-Natis system, whereas a handful of converters were illegally using e-Natis information to alter the record of these conversions.
Without meeting certain specifications no vehicle can operate as a taxi under the taxi recapitalisation programme. The National Land Transport Transition Act governs these standards and regulations.
The fraud lines occur when converters have altered the vehicles, but not to specification, and these vehicles are then sold as new taxis, says Dutton.
Banking and finance institutions which operate in the taxi industry are aware of the situation.
Marcel de Klerk, managing director of asset and vehicle finance at Absa, says the bank has been aware of the situation for about two years.
De Klerk says the bank cannot confirm the figure of 4 000 vehicles as these numbers were not verified. He concedes, however, that if there are about 4 000 vehicles, an exposure of R420-million to financing houses is feasible.
Institutions such as Absa, with around a 20% market share in the taxi finance business, and Wesbank, with a 25% market share, are among the most active players in the sector.
De Klerk says banks have stringent controls in place when providing finance to taxi operators, but they cannot control instances in which panel vans are purchased, and later illegally converted to “taxis”.
“You would definitely be exposed; it is illegal and it is unsafe for commuters,” he says.
There is concern, however, that lax enforcement by National Regulator for Compulsory Specifications (NRCS) and possible fraudulent use of the e-Natis system have allowed these illegal conversions to continue unabated. The NRCS strongly denies this. According to the organisation an approved and registered manufacturer, importer or builder (MIB) may convert a panel van if it submits the conversion to the NRCS for approval against compulsory requirements.
“This said, certain vehicles will not meet the compulsory requirements due to the construction of such vehicles,” says NRCS in a statement.
“Further to this, certain original equipment manufacturers have withdrawn some of their vehicle models due to the fact that they are aware that such vehicles will not meet the required standards.”
It is understood by the Mail & Guardian that one such make of vehicle is the Toyota Quantum and that Toyota does not allow for this vehicle to be converted for use as a taxi.
The NRCS says that the number of illegally converted vehicles is undetermined and that the figure of 4 000 is “purely speculative.”
It also denied that these conversions have been allowed to happen as a result of lax controls on the part of the NRCS. “The statement on fraudulent approval issued by the NRCS is not correct.
If the MIB applies approvals issued by the NRCS in a fraudulent manner, such fraudulent actions are dealt with in a legal manner and through the legal process as identified within our legislation.”
The NRCS with the national department of transport and various provincial departments, is working on identifying the illegal conversions as well as the MIBs that were involved in these illegal conversions.
Sting operations in KwaZulu-Natal and the Western Cape were successful and further operations will take place during the following weeks, it stated.
It said, however, that loopholes in the law may have “resulted in abuse of the system”.
When a vehicle is manufactured or imported into South Africa it is given a unique VIN or chassis number, recorded on the e-Natis system. Once a panel van is correctly converted, an MIB must apply for a new number to be registered on e-Natis. The new number should indicate that it is now classed as a passenger vehicle, and not as a goods vehicle for instance.
As one industry insider said, however, the authorities take it for granted that these conversions have been properly done, with few checks in place to ensure that the new e-Natis number is not issued incorrectly or fraudulently.
According to Imtiaz Cassim, head of taxi finance at Wesbank, the bank is concerned with the high level of fraud that has emerged in the taxi industry.
“While we are doing all we can to improve our validations on our taxi finance business, we have voiced our concerns through Sabric [South African Banks Risk Investigation Centre] who are going to pursue this matter further. We will be delighted if government could take steps to look at tightening processes to prevent fraud,” he said.
“Currently, we are having to request several regulatory documents and further validate this information telephonically, which is a “double-check” mechanism. With all these checks and balances we are still not guaranteed 100% authenticity of our validations because of the rampant fraud doing the rounds in the taxi industry. Apart from these additional checks and balances being unnecessary costs, it is debilitating to offer service to the motor and taxi industries.”
The Department of Transport had not answered the Mail & Guardian‘s questions at the time of going to press.