FMF: Taxi Press Conference

Mar 24, 2006

JOHANNESBURG, SOUTH AFRICA – Taxi turf wars, violence, safety concerns: is there any hope for the troubled Johannesburg taxi industry? The government is betting on a Recapitalisation Programme designed to put new vehicles on the road, shift routes, and return control of ranks to municipalities. Will it work?

The Free Market Foundation and the Mercatus Center at George Mason University in Arlington, Virginia, partners in the Enterprise Africa! project, address this and other questions in their new study: Taxing Alternatives: Poverty Alleviation and the South African Taxi/Minibus Industry.

To better understand the challenges facing the industry, commuters, and  policymakers, the researchers—Mr. Eustace Davie, Mr. Temba Nolutshungu, and Mr. Jasson Urbach of FMF and Ms. Karol Boudreaux and Ms. Susan Anderson of the Mercatus Center—interviewed taxi operators, drivers, and association representatives as well as commuters and government officials to learn first hand the inner workings of the taxi industry, its contributions to poverty alleviation in South Africa, its complex development, and responses of taxi owners and associations to increasing competition.

They reveal that the kombi taxi industry contributes to poverty alleviation in South Africa by providing entrepreneurs with opportunities for economic empowerment; creating jobs in taxi-related industries; and reducing travel time and facilitating travel for commuters. For taxi entrepreneurs, this is often the stepping stone to other more lucrative businesses.

The research suggests that violence in the industry is the reaction of taxi owners and associations to problems with the legal and political environment. Police complicity and poor law enforcement combine to provide incentives for some to use violence to defend otherwise unprotected rights to valuable routes. The government of South Africa now faces a choice between applying a band-aid solution that will disproportionately harm small entrepreneurs or addressing more fundamental issues for a long-term sustainable solution.

The proposed Taxi Recapitalisation Programme is likely to impose significant costs, particularly on small operators, who will be much less likely than larger operators and associations, to be able to bear these costs. It is very likely that this will lead to a government-created cartel in the industry, a loss of jobs, higher transport costs for consumers, and a continued demand for unlicensed taxis. Alternatively the study finds that the government should recognize and enforce the de facto rights to routes that currently exist. However this will only succeed if the legal and political environment—issuing and enforcing rights—improves. 

Related Material:

Enterprise Africa-Boudreaux Taxi Presentation