A recent study commissioned by the global financial services company, Visa, highlighted that although 93% of minibus taxi passengers still use cash, 56% of them would prefer to use a prepaid card if one was available.
Although digital payment solutions in the minibus taxi industry bring the promise of efficiency, transparency and financial inclusion, the web of industry practices, local customs and economic realities are hurdles yet to overcome.
A recent study commissioned by the global financial services company, Visa, highlighted that although 93% of minibus taxi passengers still use cash, 56% of them would prefer to use a prepaid card if one was available.
Additionally, 65% of drivers believe digital payments would streamline their operations, allowing them to focus more on driving and less on collecting and reconciling fares. Furthermore, 72% of vehicle owners believe that digital payment solutions would facilitate easier vehicle financing.
Jenifer Mundy, the global head of merchant sales and acquiring at Visa, spoke at the launch of a small tech startup that the company has partnered with called Loop, which enables taxi commuters to pay travelling fares using a card or phone on Loop registered vehicles.
During the launch of the Loop platform in Cape Town recently, Mundy said: “Digital payment tools open up more opportunities for businesses to get a handle on and improve their overall cash flow and revenue. The drivers we surveyed in the study highlighted that a cashless system will allow for transparency of revenue and improve their overall cash flow and also provide access to affordable credit, which is a really important step in that financial inclusion.”
The study did point out problems accompanying a shift to digitalisation that include managing and upgrading ageing infrastructure in the urban transport networks and ensuring accessibility for all passengers.
Despite the difficulties, digitising the taxi industry would enable operators to acquire financial services, government subsidies, credit facilities, “things that are really hard to access when you’re running a cash only business,” said Mundy.
“All of that ultimately contributes to the drivers’ financial stability and their growth.”
Nico Mclachlan, the managing director at Organisation Development Africa, refers to a driver’s financial standing as the “bankability” of taxi operators.
He told the Mail & Guardian that a shift to cashless payment systems can “significantly” enhance the taxi operator and collectively the industry’s bankability.
A cash-based system is not necessarily transparent. But, when using banking facilities, an operator’s daily cash income and payments become legible to the banker “and this can play a role in lowering the [assumed] risk profile of the industry,” said Mclachlan.
“The high interest rates charged by lending institutions is often justified by the assumed risk profile of the individual operator. Cashless fares demystify this.”
Taxation conundrum
Greater transparency on cash flow brings in the issue of taxation of the industry.
In his 2020 book, War Party; How the ANC’s Political Killings Are Breaking South Africa, author Greg Ardé concludes by reflecting on a conversation he had with Police Minister Bheki Cele.
During the conversation, Cele commented on tax and the taxi industry. “Taxi money can’t be found by the taxman. It is cash, it is like church money. The taxman can’t do anything. Nobody knows how much they collect. There is no auditor. They use cash. So they are in a position to buy what they want. They buy whoever they want to buy.”
The taxi industry’s annual tax contribution for 2021 stood at about R5 million, according to a response by the finance minister to a parliamentary question posed by the Democratic Alliance.
In 2016, the M&G reported that the taxi industry generated more than R90 billion a year in fares.
Although many maintain the minibus taxi industry is notorious for tax evasion, some stakeholders argue that taxis pay their share.
Mclachlan debunked claims that the taxi industry was not tax compliant, saying that to get an operating licence, “you need to submit a tax clearance certificate”.
Melton Oppelt, the chairperson of the Mitchells Plain to Bellville route, said he has been registered for tax since 2005, “and it’s not really that dangerous to register for tax”. As a taxi owner, Oppelt said his business is tax compliant and the “next step” is to help the driver to become a taxpayer. Using a digital payment system would enhance a driver’s transparency, he said.
The South African National Taxi Council (Santaco) national spokesperson, Rebecca Phala, said the council continues to be committed to the vows it made at the 2020 National Taxi Lekgotla. This includes that taxi associations become formalised taxi businesses and a cashless fare payment system be established.
“The collected fares will duly be administered through the finance and accounting offices of the cooperatives who will ensure [tax compliance],” said Phala, adding that a “seamless undertaking of taxation in accordance with national legislation” would take place.
But not all taxis are associated with Santaco, nor do all taxis have operating licences.
Gauteng, the economic hub of South Africa representing the majority of the workforce in the country, has 41 045 legal operating licences in circulation. There are 20 158 legally owned taxi permits in KwaZulu-Natal and 12 704 in the Western Cape, the M&G reported in October last year.
The three provinces have a total of 73 907 operating licences while in March 2017, Santaco estimated that there are more than 200 000 minibus taxis — with or without permits — nationwide.
A taxi owner who operates in areas between the Cape Flats and Cape Town, told the M&G that his drivers earn extra money by “renting out” their operating licences to other drivers, subsequently distorting the exact amount of tax cleared operators.
“Once you digitise papers and money, there is transparency,” the vice-president of product and solutions at Visa, Vinesh Ramnarain, told the M&G, stressing the importance of digital migration.
Not married to cash
Loop’s pilot programme is limited to 100 taxis operating on the Bellville to Mitchells Plain route, and it aims to reach 1 000 vehicles in the next year, according to its founder, Imtiyaaz Riley.
Loop is one of many cashless payment methods that has entered the transport industry in recent years.
Santaco also introduced a cashless smart card payment system on its commuter taxis in 2016. Through Santaco’s trading arm, Taxi Choice, commuters can preload cash on a Fair Pay card that can be swiped in a taxi.
Although the online sites of Taxi Choice are being reconstructed and are not accessible, Phala said the platform “is still fully operational”.
She said they support the move towards digital solutions.
“We embrace technology because like all other modes of transportation, we understand that technological advances will always establish loopholes in present day operations and seek to complement them.
“Through the meter taxi desk of Santaco, we are equally supporting the invention of locally owned e-hailing apps because we believe we may find standardisation of our operations to those utilising hailing technology to ensure [a level] playing field of all road based modes of transportation.”
Phala said research and commuters have indicated a cashless payment system would be welcome.
Brian Dreyer, the vice-chairperson at the Elsies River Taxi Association in Cape Town, said he would like cashless payments but added that the majority of his target market still uses money.
In nearby Mitchells Plain, Henry Williams, the regional chairperson of Santaco, said he too welcomes cashless payment methods.
Speaking in his personal capacity, the spokesperson for the Cape Amalgamated Taxi Association, Nkululeko Sityebi, told the M&G they always welcome innovations such as Loop if they are reliable and safe. But he cautioned that a whole system change would be necessary should a complete cashless system be implemented. “It is not going to be easy.”
“In the bigger picture it can help transparency but there are a lot of other factors. Remember, a driver needs to fill up the petrol in the morning, and normally you take the money that you made to pay for the petrol,” said Sityebi.
Mclachlan said the notion that passengers are married to cash is wrong. Citing a survey undertaken in Mitchells Plain from 2017 to 2019, he said passengers showed interest in shifting to cashless payment systems.
Aside from commuters using a card to pay instead of cash, Mclachlan said most drivers do have bank accounts.
“Of course there’s this kind of standard model in the industry, but there’s been a lot of deviation from that standard model. So I would say most drivers you’re going to find have bank accounts. Most passengers have bank accounts, and would have access to a debit card in most cases.”
Mclachlan said that for a transport mode that moves more than 15 million people daily, the taxi industry must encourage digital migration.
“To play its rightful role in the urban mobility systems of the 21st century the MBT [minibus taxi] industry must up its game. The embrace of technology in the form of cashless fare systems, modern fleet management systems and mobile phone based passenger information systems form part of this embrace,” said Mclachlan.