/ 11 May 2023

Minibus taxis hit as economic crisis, Uber disrupt passenger habits

Taxi
Got space?: Taxis in central Johannesburg are not yet seeing pre-Covid occupancy levels. The reasons include more people working from home, rising cost of living and unemployment. Photo: Leon Sadiki/Getty

A hallmark of South African life since the Covid-19 pandemic hit three years ago has been sparsely populated office blocks as employers and employees embrace the concept of a hybrid working model.

In addition, foot traffic in the country’s almost 2 000 malls has remained sluggish because of both the growth of online retail and, more critically, a sluggish economy that has struggled under the weight of record high unemployment, higher interest rates and the electricity shortage.

In 2021, only 42% of the working age population in South Africa was employed compared with the National Development Plan’s target of 60% by 2030. The country’s official unemployment rate stood at 32.7% in the last quarter of 2022, which means some 7.8  million people were out of work, according to Statistics South Africa. 

The effect of these macroeconomic changes in the wake of the pandemic and to the working conditions for mainly office-based employees has become increasingly noticeable in the country’s disparate public transportation sector.

With fewer workers commuting in the morning and afternoon rush to and from work and the decline in the number of shoppers because of smaller wallets, it’s becoming a growing problem even for what was once thought of as the most resilient of industries: the minibus taxis.

On average, 39% of South Africans earning above R10 000 a month are splitting their time between their traditional workplace and home or another remote location, according to BrandMapp, an independent landscape study of economically active South African adults. 

“Taxis have been viewed as failure-resilient [in a troubled economy] simply because commuters need to move from point A to B, whether to go shopping or to work. But the trend now is that taxis are travelling less and they are doing fewer trips. 

“The trips they are doing are taking longer because of load-shedding as traffic lights don’t work. Petrol has gone up fairly markedly, meaning trips bring less revenue,” said Simon Brown, an independent analyst and founder of Just One Lap. 

Since Russia’s invasion of Ukraine last February, petrol prices have lifted to more than R23 a litre, feeding into higher inflation rates and slowing what was an already sluggish economic recovery from the pandemic. Further depressing growth is the record run of consecutive days of load-shedding since October.

SA Taxi, owned by Transaction Capital, which finances the taxi industry, said on its blog that minibus taxis passengers experience prolonged transit times and “taxi­preneurs” (entrepreneurs in the taxi business) lose money daily when their vehicles are caught up in traffic jams, which results in fewer trips and lower income. 

The decline in taxi commuter numbers has been noticeable in results coming from big retail companies, who have said that customers are making fewer trips to supermarkets and are rather going to stores once and buying a bigger basket of goods.

In its annual results for the year ended July 2022, the country’s largest grocery retailer, Shoprite, said growth was achieved by a higher average basket spend, which increased by 4.9% for the period. 

The latest NielsenIQ State of the Retail Nation report found that in the period 2019 to 2022 shoppers have halved the number of times they go grocery shopping in a month compared with their shopping behaviour before the pandemic. 

Brown said listed property companies also paint a picture of shifting consumer habits regarding footfall at malls. 

Redefine Properties, which owns Centurion Mall and Maponya Mall, said foot traffic at its malls has not yet reached pre-Covid-19 levels, signalling that consumers are still making fewer trips to malls. The property company said in its trading update in January that foot traffic is 94% of pre-pandemic levels, up 2% from a year ago. The average footfall for all of 2022 was 80% of pre-pandemic levels.

“People might still spend the same amount of money at a shopping centre but instead of going every week they go every second week. A lot of it is discretionary travel.

 “There is anecdotal evidence of people who would catch two taxis to work and are now catching one taxi and walking the rest of the way simply because it is tougher being a consumer in South Africa at the moment,” Brown said. 

The country is in a cost-of-living crisis, with escalating food and fuel prices accompanied by rate hikes that have added thousands of rands to home loan and other debt repayments every month. Characterising this crisis is the significant increase in unemployment numbers. 

The emergence of e-hailing services such as Uber and Bolt has also disrupted the traditional transportation industry, specifically the minibus taxi industry. As of 2021, Uber has been available in more than 40 cities in the country, and serves about 80% of the urban populations.

On the JSE, the changes in the country’s transport sector over the past three years has been seen in the collapse of the share price of one-time investment darling, Transaction Capital.

Since its listing on the bourse in June 2012, the stock gained more than sixfold to its April 2022 peak, standing out as one of the country’s best-performing companies. From that peak, the stock has declined more than 84%.

“The taxi industry is definitely dragging Transaction Capital down … It is just very exposed to the consumer,” Brown said. 

Earlier this week, the company reported a 77% decline in earnings for its six months to end March. 

“There have been fewer customers and fewer fare increases. Commuter movements have not kept up with costs, which have gone up dramatically. We’ve had high interest rates and high fuel prices and a higher price of the actual minibus taxi vehicle itself,” said David Hurwitz, the chief executive of Transaction Capital.

“We’ve always said that the sector would recover and that’s because structurally it is built into South Africa’s economy and is our de facto public transport infrastructure. But what we didn’t realise is that it hasn’t recovered fully.”

Transaction Capital warned that the minibus taxi environment was unlikely to rebound at a rate in line with expectations. 

“The industry’s profitability remains stressed due to stubbornly elevated fuel prices, vehicle price increases, sharp interest rate hikes, increasing cost of parts and maintenance, persistently low commuter volumes, and the lack of corresponding fare increases.” 

Makwe Masilela, of Makwe Fund Managers, said the pandemic definitely played a role in shaking up the taxi industry, because people are not travelling the way they used to. “Since then there has been a change in commuter habits. Some people started working from home while others are carpooling to work,” he said. “Although there is still a market for taxis it is not growing as it was thought to grow.”

The minibus taxi industry, which began in the mid-to-late 1960s, is not subsidised and has always experienced macro-economic factors head-on.

On the other hand, the state has provided support for bus services in the country’s major centres, where the department of transport manages 34 bus subsidy contracts awarded to 13 bus operators, Putco among them. But the bus sector has not been left untouched by the changing dynamics in the transport sector.  

Last week Putco said it had to suspend its service because of diesel shortages.

“The underfunding of the public transport industry as well as the excessive fuel increases in the past few months have exacerbated the situation,” said the bus service’s spokesperson, Lindokuhle Xulu. 

The critical question regarding public transport is whether the decline is seasonal and a result of a weak economy or whether the pandemic introduced structural changes — the consequences of which we are beginning to discover.