Transformation Strategy for Taxi industry: SANTACO and Department updates

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21 March 2011
Chairperson: Ms N Bhengu (ANC)
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Meeting Summary

The Committee asked the Department of Transport (NDOT) and the South African National Taxi Association Council (SANTACO) to give follow-up reports on meetings that the Committee had requested must be held by the two entities to settle how NDOT could assist SANTACO in implementing its 2020 vision. The NDOT outlined there was still an outstanding issue around economic assistance to the taxi industry, which was agreed to in 1997. NDOT was aware of the restructuring problems in the industry but maintained that it was not for NDOT to deal with this, but for the taxi industry itself to resolve, as it must adopt a new approach and identify its own developmental agenda. Government would support the programme, and create the necessary regulatory environment to ensure its success, but the programme must be owned by the industry. Other NDOT responses to transformation of the whole public transport had had an effect on the industry, but changed thinking could address this. Lessons had been learnt from past experiences to develop sustainable programmes. Annual financial support had been given to SANTACO, the taxi industry had been integrated into mainstream public transport, and supported with equity acquisition. NDOT was also committed to moving swiftly on training initiatives, and was finalising details with SANTACO on establishment of an academy. Although there was currently no budget set aside for the business plan, the two entities were sourcing finance, with care to avoid unintended consequences. Government needed to make immediate interventions to transform public transport, but structured support for the taxi industry should be located not in government but in the industry itself. There were some challenges around monopoly shareholding and empowerment at all levels must be encouraged.

SANTACO was appreciative of departmental initiatives, which were practical, and it agreed with the sequence to be followed. The contribution of the industry to the 2020 Legacy Project was noted. It agreed that seed capital and timelines still remained to be finalised. The commitment of government was noted and appreciated.

Members indicated that they were happy with the approach taken, but asked for further clarity on the current status of the industry, the question of monopolies and the objectives of the training academy.

Meeting report

Transformation Strategy for Taxi industry: South African National Taxi Association Council (SANTACO) and Department of Transport (NDOT) update reports
The Chairperson indicated that this meeting would follow up on a meeting three weeks earlier, when both the National Department of Transport (NDOT or the Department) and South African National Taxi Association Council (SANTACO) had outlined their strategy to transform and further develop the taxi industry. The Portfolio Committee was supportive of the initiatives, but, in order that a consolidated plan should be produced, asked the two entities to hold joint meetings, and settle how NDOT could assist SANTACO in implementing the 2020 vision.

She asked that the Department should indicate what assistance it could give, and that SANTACO should outline what assistance it required, so that the Committee could make the necessary political input to enhance the initiatives. The Committee acknowledged that since 1994 there had been a paradigm shift in government thinking, and there was political commitment to assisting the taxi industry.

Department of Transport briefing
Mr George Mahlalela, Director General, Department of Transport, outlined that there was still an outstanding matter relating to economic assistance to the taxi industry. In 1997, the National Taxi Task Team agreed that there would be economic assistance, and although there had been progress, there remained much to be done. The presentations by NDOT were based on the commitment made in 1998. However, there had been little movement, not because government lacked political will, but rather because it could not restructure the entire taxi industry as this must be done by the industry itself. NDOT was aware of the restructuring problems, and said that the industry had to take a paradigm shift and identify its own developmental agenda. The role of government would be to support the programme, and create the necessary regulatory environment for the programme to succeed. The programme would be owned by the industry after the initiation period. NDOT had indicated that it would merely fund the strategy on behalf of SANTACO, and had made it clear that it was not its place to approve or not approve the TR3 2020 Strategy, but to support the industry.

Mr Mahlalela added that NDOT also had a historical problem in that it simultaneously needed to respond to other public transport transformation and integration. This carried some unintended consequences for the taxi industry. He was not suggesting that there were bad intentions on the part of the taxi industry, but noted that the integration of transport systems, during roll out, could have some negative effects, but he hoped that a change in the industry’s thinking could help to resolve this problem.

In terms of the current status, Mr Mahlalela said that much could be learnt from past experiences, in order to develop sustainable programmes. There had been annual financial support given to SANTACO. Transformation of the public transport system had resulted in the integration of the taxi operations into mainstream public transport. The taxi industry had been supported in equity acquisition in other business, and all of these were critical areas for the industry. Mr Mahlalela stressed that cooperative schemes were of utmost importance, as they would formalise the industry, and could piece together the corporatisation process in its historical context. A set-aside approach was adopted to debt subsidies were concerned. The dedicated investment model was based on all the support areas that had formed the basis of the relationship between the Department and SANTACO.

In relation to economic assistance, the Department had committed itself to moving swiftly with the training initiative and was currently in the process of finalising the details with SANTACO on the establishment of an academy. The business plan was not currently linked to a budget, but SANTACO and the Department would be attempting to source money from other organisations and agencies. There could not be piece-meal interventions, as these had both positive and negative consequences. Although there was capacity to put in money, previous attempts had shown unintended consequences. He gave the example that taxi recapitalisation led to price increases as the taxi owners had to borrow money from banks. In order for the strategy to succeed the entire value chain needed to be addressed, which was envisaged in the TR3 2020 strategy.

The business plan appreciated what needed to be done by government. The 2020 strategy required support across the board to drive it forward. Government needed to make immediate interventions to support the plan to transform the public transport system. Structured support was needed for the taxi industry, but this should not be located in the Department, but in the industry itself to allow for benefit from potential shareholding opportunities.

Mr Mahlalela noted that there were still some challenges around shareholding. Existing contracts were driven by large monopolies. For instance, in Gauteng, Putco owned half or more of the contracted bus services. Whilst large entities did show strong balance sheets, this did not allow space for serious empowerment to take place. In future, it was hoped that the taxi industry would be empowered and encouraged at all levels, which meant empowering the operators on the ground as distinct from the BEE operators. The Department would be hosting an Investor Conference in June, with participation from land transport and aviation sectors. The Department had also developed a working relation with Development Bank of Southern Africa (DBSA) for technical support.

Mr Mahlelela requested that the Committee note the content of the presentation, support the initiatives and the SANTACO 2020 strategy, and the achievement of objectives. The Department was committed to ensuring detailed rollout of the strategy.

SANTACO briefing
Mr Andrew Mthembu, President, SANTACO, noted that the direction in which the NDOT was moving was not only theoretically based but was also practical, and he truly appreciated this response. There was transformation. The NDOT had learned from the Bus Rapid Transport (BRT) experiences and was moving in the right direction. He agreed that the sequence outlined by the NDOT must be followed to achieve collaboration and transformation, and it was hoped that the body would show harmonised working. The 2010 Legacy Project was outlined, noting that the taxi industry gave support in transporting passengers from the airports to the cities. He noted that it was important to realise that simple planning applied to the taxi industry, because services were based on the identification of needs at specified times.

Mr Mthembu said that two issues still required clarification. The first related to the seed capital. The other was the timelines, which were regarded as crucial. SANTACO welcomed the commitment from the part of government and the Department.

Mr Bongani Msimang, Chief Executive Officer, SANTACO, then gave a brief presentation to the Committee, in line with the attached document.

The Chairperson welcomed all presentations and emphasised that she was happy with the Department’s approach to assisting SANTACO. This showed developmental economic thinking, which was supported by the ANC.

Ms D Dlakude (ANC) also expressed her support for the turnaround strategy, noting that she was proud of SANTACO.

Mr M De Freitas (DA) requested the Department to further explain the current status of the industry, and wanted some clarity on the references to monopolies, as well as the objectives of the training academy.

Mr H Maluleka (ANC) expressed his support for the strategy.

The meeting was adjourned.


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