South Africa has been under lockdown for more than three months. The country has recorded almost 500 000 infections of corona virus cases since the start of the lockdown. This is accompanied by just under 10 000 deaths. South Africa is expected to reach the peak of the Covid pandemic by September. Various measures have been undertaken by the government to mitigate against the spread of the virus. A state of emergency was declared at the end of March and has since been renewed. International borders have been closed. Bans of various products such as alcohol and cigarettes have been instituted. Social distancing measures including wearing masks and constant sanitization are in place. Schools remain closed so are other sectors such as clubs, gyms, hotels among others.
The economy has taken a knock from the pandemic induced lockdown. Figures from Statistics South Africa reflect a GDP contraction of -2% in the second quarter. The National Treasury has predicted a negative economic growth of 7.2% for the 2020/2021 financial year. President Ramaphosa has stuck to his guns with regards to non-pharmaceutical methods of containing the Corona virus. As the infections keep rising, President Ramaphosa has taken a decision to close schools. This was after civil society organizations such as the One Movement South Africa led by Mmusi Maimane and the teacher’s union SADTU, made calls for schools to close.
Transport regulations published
However, what has been striking is the way all the rules and stops that apply to the broader sections of the economy have been relaxed when it comes to the taxi industry. The same week that President Ramaphosa announced a closure of public schools for four weeks, the Minister of Transport, Mr. Fikile Mbalula published rules that allow taxis operating within the metros to have a full capacity of passengers. Those that ply long distance routes have been permitted to carry 70% of their loads. The regulations published on the 22 of July were aimed at formally legalizing the outcomes of the discussions between the taxi industry, represented by the South African National Taxi Council (SANTACO) and the government represented by the Department of Transport.
Pressure to stick with the ‘crowd’
The stage was always set for a showdown between the taxi industry and the government from the beginning of the lockdown. This is because the lockdown in essence prohibited movement of persons that was not linked to essential services. In this regard, essential services related to health, food and fuel sectors. The movement of persons restrictions under the hard lockdown already meant that the taxi industry would lose a lot of income. However, as Level 5 restrictions were applied to essentially all industries, it was difficult for any industry, including the taxi businesses to attempt and stick out. Any efforts by the taxi industry to pull in a different direction under the hard lockdown would not have done the industry any favors even from those most sympathetic to the industry.
This is because at that particular time, the country was in unison that a hard lockdown has to be instituted and enforced to allow government to prepare for the peak. Needless to say, that government never used the lockdown to create any capacity. Instead, it seems the lockdown was used to prepare party functionaries and politically connected persons to loot tax payers’ monies.
A perfect storm brewing
The hard lockdown lasted from the end of March to the beginning of June, 2020. During this time, the Minister of Health Zwelini Mkhize would allude to a coming perfect storm. This was in reference to the envisaged peak of the coronavirus infections. The expectation is that the peak would happen in September. Currently, it is not yet clear if that peak would still happen in September or earlier in August. While Minister Mkhize was focused on the impending perfect storm of Covid-19 cases, his Transport counterpart, Minister Fikile Mbalula was oblivious to the gathering clouds in the taxi industry. The early signs of the dissatisfaction within the taxi industry happened at the tail end of the hard lockdown or level 5. This was when the government started distributing relief funds to various economic sectors. The taxi industry was not covered by the relief funds in spite of having lost a lot of revenue due to the hard lockdown.
Demands for compensation
As President Ramaphosa continued to announce various relief funds running into billions of rands, the taxi industry’s calls for compensation grew. Initially the response by government was silence, followed by weak dismissals of the industry as being not formalized and difficult to audit. As will be indicated, the taxi industry serves a large section of working class and poor South Africans. The industry strategists are alive to the power of their constituencies as a bargaining tool. When the government was unresponsive to the taxi industry calls for compensation, the latter had to move the first piece on the chess board.
The first salvo
Government refusals to compensate taxi owners for their loss of income during the hard lockdown prompted the industry to fire their first salvo. This was in the form of unexpected, out of cycle and unaffordable fare increases. The taxi industry therefore announced a raft of fare increases across the board. Passing the costs of revenue losses to consumers was aimed at serving two distinct but related purposes. First was a practical necessity of recouping lost revenue while the second was to immiserate the already suffering commuters. As a response, the government announced compensation for the taxi industry.
The government response to the fare increases was swift to avoid, or at least manage the backlash from commuters. This is because the ANC government is alive to the impending elections in 2021. Besides, the commuters could have organized themselves and embarked on protests. The protests would not have followed any social distancing measures and would therefore have embarrassed the government, besides totally undermining all health-related efforts and gains aimed at controlling the spread of the coronavirus. As a result, the government responded by announcing billions of rands aimed at compensating the taxi industry for revenue loss. Like all Covid related relief, the funds would have been loans and not handouts, though the probability of these being written off over time is quite high. The government was not prepared for the response from the taxi industry. This response was to firstly reject the multibillion compensation offer and later on accept it with conditionalities.
By rejecting the government financial relief efforts, demanding more money and attaching further conditions, the taxi industry was dragging the former into a drawn-out game of brinkmanship. Basically, the taxi industry demanded more financial relief or alternatively accepting the government offer and be allowed to operate in full capacity. The industry was making no concessions. It wanted to be given financial relief for the loss suffered during the hard lockdown. At the same time the industry did not want to incur any future losses due to the lockdown. In a nutshell, the taxi industry wanted the government to put them in a restitutio in integrum. In other words, in a position in which the industry would have been in, had the corona virus not happened. This demand is odd and unrealistic in that besides not being feasible, there is no precedent to it in a sector within the South African economy. When the government refused to accede to the demands of the taxi industry with regards to increasing the bail outs and having the industry operate full capacity, more action followed.
The taxi industry’s demands to the government gained a sympathetic ear among South Africans. This was mainly due to that the following reasons: the industry services the majority of South Africans; unlike the trains and buses it is not subsidized and thirdly the government has been bailing out the South African Airways to the tune of hundreds of billions of rands. In fact, while the taxi industry was in negotiations with the government, the latter was at an advanced stage of reconstituting the flag carrier and making more financial commitments. South Africans across the divide were of a view that bailing out the SAA was akin to the poor subsidizing the rich and tantamount to wasteful expenditure. It was against this background that the taxi industry decided to embark on a strike action. The response by the law enforcement agencies was quite dismal, either reflecting a strategic enforcement refrain from the government or sympathy by the law enforcement agencies or both. However, the taxi drivers protest action did not yield positive results forcing the industry to escalate their actions.
The nuclear option and capitulation
When the industrial action by the taxi industry failed to produce any positive outcomes, the industry decided to press what one could call a nuclear option. The nuclear option was a gamble with commuters’ lives as it involved filling the taxis to capacity in the middle of a pandemic. Basically, the industry announced that it will have taxis operating in full capacity as a way of recouping lost revenue and mitigating further losses. There was a general sense that the industry was bluffing and the Transport Minister Fikile Mbalula responded with threats of tough enforcement measures if the industry carried out its threats. However, the taxi industry called the Minister of Transport on his bluff, when they filled their taxis to capacity and no action was taken against them by the government. Instead, the government had to play catch up and regulate in affirmation, the taxi industry’s actions which violate not only the lockdown regulations but the country’s Constitution.
Therefore, it was to be that the taxi industry manages to operate in full capacity weeks leading to the peak of the Covid-19 pandemic. In the process, the taxi industry together with the express approval of the government are endangering lives of the most vulnerable members of society. The main question is what allows a certain sector of the economy and society to self-regulate with impunity? What makes the government so helpless in the face of the taxi industry?
Why the tail always wags the dog in the taxi industry
It is important to note that while the current actions of the taxi industry may be the most brazen since the dawn of democracy in 1994, they are definitely not the first. The industry itself is key to public transport within the economy. Firstly, the industry transports 67.7% of all commuters in the country compared to 19.5% for buses and 12.9% trains. Estimates are that the industry is worth ZAR90bn with a fleet of around 200 000 taxis. In addition, taxis are highly accessible and flexible to commuters. Research has shown that only 17% of the population lives in areas where it is hard to access taxis, compared to 50% for buses and 81% for buses. More than 50% of people walk less than 5 minutes to the nearest taxi pick up point. An average taxi ride lasts 50 minutes compared to 74 minutes for trains and buses. This picture on its own makes the taxi industry a cog in the country’s public transport machine. Consequently, this would be a source of leverage for the industry when negotiating with government.
However, these figures do not provide the full reasons why the industry is not fully formalized and operates on a frolic of its own. The taxi industry operates as one big impenetrable and unregulated sector that allows for not competition. Efforts to regulate since 1994 include President Mandela appointed Special Presidential Task Team together with the National Taxi Task Team. In 2005, the government initiated the Taxi Recapitalization Program which cost the tax payer ZAR4bn with only 72 653 taxis having been scrapped by September 2018. This has since been replaced by the Revised Taxi Recapitalization Program of 2019, in which owners are being given ZAR124 000 to replace unroadworthy taxis. The taxi industry also resisted the Bus Rapid Transport systems that were started during the period leading to the World Cup in 2010.
The genesis of the taxi industry during the apartheid era in defiance of the then oppressive laws have led to entitlement issues. This has been compounded by the democratic government’s failure or refusal to subsidize what is in real terms the main public transport system in the economy. This is in stark contrast to the bus, airline and rail transport systems which while serving a minority of citizens benefit the most from government support. However, what is clear is that within the taxi industry, they are vested interests overlapping between taxi owners, law enforcement elites and politicians.
The current win by the taxi industry to transport commuters under conditions which endanger the health of the most vulnerable of citizens should offer an opportunity to pause for reflection. There is no doubt that the vested interests in the industry, in which elements within the police, bureaucracy and political elites have ownership stakes in the taxi industry would favor a self-regulating sector that is a law unto itself. The ownership of taxis by the police, politicians and bureaucrats was identified in the late 90s to early 2000s as one of the structural barriers to transforming and formalizing the sector. It therefore seems that not much has changed ever since.
Towards an inclusive, safe, formalized and regulated public transport system
The Ramaphosa administration should, as part of a reimagined social compact, make bold steps towards formalizing the taxi industry and having targeted subsidies. Already the Competition Commission has in its late 2019 report urged government to subsidies, regulate and increase competition within the industry. Political leaders in government must make decisions that are in the best interests of citizens than act as lobbyists for particular industry. One can only suspect the level of disguised lobbying being made at the highest echelons of government being made by some political leaders, on behalf of the taxi industry, to the detriment of commuters. Maybe it’s time that public interest lawyers reflect on a possibility of a class action on behalf of those who may get infected with Covid-19 while riding on taxis operating on full capacity.
Mr Azwimpheleli Langalanga is a Senior Associate: International Trade and Investment Policy at Tutwa Consulting Group. He writes in his personal capacity.