​Taxis hope Competition Commission inquiry puts money in their pockets

Starting in June, the Competition Commission is to delve deeply into South Africa’s passenger transport market. Over the course of an expected two years it will consider the way Uber prices are set, whether a Gautrain expansion to Soweto and Mamelodi could do more harm than good, and how tuk tuks operate.

But mostly, the minibus taxi industry hopes, it will look into ways that the government can make regular — and hopefully significant — payments to its operators from the fiscus.

“This should have happened long ago, now we have the technology to do it,” says Philip Taaibosch of the South African National Taxi Council (Santaco). “We’ll go to [the Competition Commission] and recommend something like that.”

The commission has received many individual complaints about unfair pricing or anticompetitive behaviour involving bus services, and lately the Uber ride-hailing platform. Last week it formalised the terms of a market inquiry to look into these and the market as a whole.

By the end of the large and costly exercise the commission says it hopes “to understand the general state of competition in the land-based public passenger transport industry”. And, as with similar broad inquiries into the health industry and grocery sales, it is not intended to be academic.

There is reason to believe that features of the transport industry may “prevent, distort or restrict competition”, the commission says, aspects it has significant powers to address.

The minibus taxi industry, with its collective setting of prices, could be expected to be worried about such an inquiry. Instead, the industry has reacted to the start of the process with great optimism.

“It is an insult to the Constitution that you don’t have subsidies for commuters on minibuses,” says Taaibosch. “Government has always had this problem that taxi operators are scattered, individual business, so it is difficult to pay subsidies, but now that we are moving cashless you can fix that.”

The only direct subsidy for minibus taxis is through a recapitalisation mechanism, transport economist Andrew Kerr reported in a seminal 2015 paper cited by the commission in its inquiry terms. The lack of subsidy adds to the massive transport cost — even called a tax by Kerr — on the poor.

Meanwhile, less used and less accessible buses and trains receive considerable support from the state.

To fix that, Santaco will probably recommend that the commission mandate subsidies in one of several possible forms. The government can load prepaid fares on to commuter payment cards in a similar way to how social grants are paid, for instance. Or the fares system can be used to calculate passenger numbers and distance travelled and make payments directly to taxi operators to offset discounts given to customers.

Such a mechanism, Taaibosch argues, will be tantamount to finishing business started in 1994.

“This should have happened long ago,” he says of minibus subsidies.

The proposal is likely to be controversial in an industry where minibus taxis are seen as one of the only profitable — and sometimes very lucrative — lines of business.

Also likely to draw controversy is the commission’s intent to look at plans to hugely increase the Gautrain network, currently being punted by its operating consortium and the Gauteng provincial government. The expansion will require significant government financial support.

“The pricing of the Gautrain segregates passengers, resulting largely in the middle- and upper-income passengers having access to the Gautrain,” the commission says in its terms of reference. “Further, initiatives such as the Gautrain come with feeder buses that only passengers that use Gautrain can access, thus excluding a majority of passengers that could have made use of these services.”

It hopes to identify potential “unintended consequences” of expanding that network to Soweto to the south of Johannesburg and Mamelodi to the north of Pretoria, the commission says.

The Gautrain looks forward to discussions with the commission, spokesperson Barbara Jensen says.

“Our understanding is that the Competition Commission is coming at it from a subsidy perspective to ensure that public funds are used equitably. We do not know what the impact of this will have on our route planning but we are confident that there is a very strong case for rail as the backbone of an integrated public transport system for the province.”

Also on the agenda are Metrorail train services, smartphone-enabled taxi services such as Uber, the short-distance three-wheeled tuk tuks that operate in some cities, and traditional metered taxis.

Although assessing the state of competition with and between such types of transport is important, the commission says, it will balance the need for competition with the efficiency that can be achieved by co-ordination, and even monopolies.

Phillip De Wet
Guest Author

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