How Minibus Taxis Contribute To The Economy

By Roane Swindon

South Africa’s minibus taxi industry has developed and evolved over a period of at least 50 years and has become an economic force to be reckoned with today. Minibus taxis are often viewed as nuisances on the roads despite the very necessary service they provide to supplement state public transport, and despite its real contribution to the South African economy and many commercial industries.

There are around 200,0001 taxis driving around the country, contributing much to commercial industry.

 

Public Transportation

A report by Transaction Capital in 20152 indicated that minibus taxis completed 15 million commuter trips daily – and the industry is entirely self-sustainable. In fact, it would not be an overstatement to say that it is its own commercial industry, estimated to be worth R39.8 billion in 20143, the value of confirmed transactions in the residential property industry in the same year4. In 2011, the government handed 66% of the first phase of the BRT system in Johannesburg to taxi industry shareholders in a significant BBBEE transaction5.

 

Vehicle Finance and Purchases

The unprecedented growth of the taxi industry is a successful venture for vehicle financiers. Transaction Capital’s taxi financier, SA Taxi, saw growth in loans nearly four times larger than the Big Four banks, Capitec, and Investec could muster in the last financial year6. The high demand is the result of ageing taxis: most are believed to be over nine years old7 and the company has capitalised off this market.

 

About 1,200 new minibus taxis are purchased every month8 and Cars.co.za quotes the price of a new Toyota Quantum Sesfikile 2.7 at R401,3009. In May 2017, only 26,317 vehicles were purchased10 and minibus taxis may then represent 4% of the total.

 

Car Parts, Servicing, and Maintenance

Toyota’s minibus models were so popular they are manufactured in South Africa and the call for quality brake pads resulted in Federal-Mogul introducing a purpose-designed line of brake pads for Toyota Quantum taxis in 201411. Every taxi requires after sales services, such as parts, panelbeating, and general maintenance, thus supporting such businesses.

 

A service on a minibus taxi is around R750. Some taxis on the road since 2008 have registered between 500,000km and 750,000 km. Bearing in mind the average service interval is 10,000km, resulting in between 50 and 75 services in just nine years , that translates into at least R7.5 billion spent on servicing alone. Brake pads are most often replaced at around R180 a piece, lasting between three and six months.

 

Tyres

A new set of quality tyres for Quantum minibus taxis costs around R5,500, which should last around 50,000km. If the average nine-year-old taxi has driven at least 500,000km, a new set of tyres would have been required at least 10 times, costing around R55,000 per taxi, translating into a total of at least R11 billion contributed to the industry.

 

Petrol

The average taxi will spend roughly R850 per day for a full tank of petrol12. An average commuter-owned vehicle may spend that amount per month.

 

Low-Income Service Economy

Over half of South Africans earn less than R3,000 per month13, with 91% of low-income households opting to use taxis14. This work is the backbone of the economy, with workers cleaning homes, preparing meals, laying roads, building the very taxis people need to get to work … and the minibus taxi is a viable and available transport option, without which many of these workers would not be able to arrive at work. Roger Behrens, director of the Centre for Transport Studies at University of Cape Town, told Focus on Transport earlier this year that such economic activity would not be possible without the minibus taxi15.

 

The Informal Economy

Taxi ranks have given rise to informal marketplaces offering a variety of services to commuters and taxi drivers. Estimates put the value of the informal economy at around 8%16 of South Africa’s gross domestic product. The taxi industry thus supports this and also provides employment and income opportunities to low-income groups17.

 

The Economy at Large

Without the taxi industry, everything comes to a standstill, as evidenced in June 2017 when SANTACO protested the exorbitant prices of and financing for new minibus taxis. SACCI warned the strike would negatively effect the economy: “employees [were] late for work, passengers miss[ed] their flights and [there was] a disruption on production schedules”18. Imagine the effect if taxis decided to stop operating entirely. In addition, around 360,000 jobs are enabled by the industry, including queue marshalls, administrators, fare collectors, and conductors19.

References:

1 ‘South Africa Opens Second Minibus Taxi Assembly Plant’, Economic Development Department; 13 November 2012. http://www.economic.gov.za/communications/50-media-releases/175-south-africa-opens-second-minibus-taxi-assembly-plant

2 SA Taxi Market Context; Transaction Capital; September 2016. https://www.transactioncapital.co.za/downloads/taxi/TC%20website%20SA%20Taxi%20section.pdf

3 ‘Inside SA’s R40bn taxi industry’; Moneyweb; 10 March 2014. https://www.moneyweb.co.za/archive/sas-r398bn-taxi-industry/

4 ‘Essential for economic growth to keep property cycle ticking over, says property MD’; Knight Frank; 25 March 2015. http://www.knightfrank.co.za/news/essential-for-economic-growth-to-keep-property-cycle-ticking-over-says-property-md-06778.aspx

5 ‘Taxi Industry Key to Economic Development: Govt’; SANews.gov.za; 2 June 2011. http://www.sanews.gov.za/business/taxi-industry-key-economic-development-govt

6 ‘SA Taxi Drives Transaction Capital; Financial Mail; 8 June 2017. https://www.businesslive.co.za/fm/money-and-investing/2017-06-08-sa-taxi-drives-transaction-capital/

7 SA Taxi Market Context; Transaction Capital; September 2016. https://www.transactioncapital.co.za/downloads/taxi/TC%20website%20SA%20Taxi%20section.pdf

8 ‘South Africa’s Rattletrap Taxis Move Millions – and An Economy’; Reuters; 10 March 2014. http://www.reuters.com/article/safrica-taxis-idUSL6N0LQ3BL20140310

9 New Toyota Quantum Specs & Prices in South Africa; Cars.co.za; Accessed 28 June 2017. http://www.cars.co.za/newcars/Toyota/Quantum/

10 South Africa New Car Sales; TradingEconomics.com; Accessed 28 June 2017. https://tradingeconomics.com/south-africa/car-registrations

11 ‘Minibus Taxis in SA to Set the Trend in Brake Pad Safety and Sustainability’; Federal-Mogul Motorparts press release – NGAGE Media; 23 June 2014. http://media.ngage.co.za/minibus-taxis-in-sa-to-set-the-trend-in-brake-pad-safety-and-sustainability-0

12 ‘Petrol-Guzzling Taxi Industry Goes Green’; The Star Early Edition; 16 March 2017. http://www.pressreader.com/south-africa/the-star-early-edition/20170316/281513635964018

13 SA Taxi Market Context; Transaction Capital; September 2016. https://www.transactioncapital.co.za/downloads/taxi/TC%20website%20SA%20Taxi%20section.pdf

14 ‘A Case For Minibus Taxis’; Focus on Transport; 4 April 2017. http://www.focusontransport.co.za/index.php/regulars/focus-on-bus-and-coach/bus-and-coach/3221-a-case-for-minibus-taxis-.html

15 ‘A Case For Minibus Taxis’; Focus on Transport; 4 April 2017. http://www.focusontransport.co.za/index.php/regulars/focus-on-bus-and-coach/bus-and-coach/3221-a-case-for-minibus-taxis-.html

16 ‘Vital Part of SA Economy Still Being Ignored’; Finweek – English Edition; 4 May 2017. https://www.pressreader.com/south-africa/finweek-english-edition/20170504/281908773036039

17 ‘The Informal Economy: A Growing Industry’; SASA Blog; 17 January 2015. http://blogs.elon.edu/sasa/2015/01/17/the-informal-economy-a-growing-industry/

18 ‘Chamber of Commerce Says Taxi Protests Were Reckless’; SA Breaking News; 17 June 2017. http://www.sabreakingnews.co.za/2017/06/17/chamber-of-commerce-says-taxi-protests-were-reckless/

19 SA Taxi Market Context; Transaction Capital; September 2016. https://www.transactioncapital.co.za/downloads/taxi/TC%20website%20SA%20Taxi%20section.pdf

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