The South African public taxi industry is reported to serve 15 million commuters per day. It is the most commonly used mode of public transport in the country, reported to make an estimated R90 billion annually, says Riaan Graham, sales director for Ruckus Wireless sub-Saharan Africa.
The industry however is still largely unregulated, and has festered challenges such as unlicensed vehicles, violence, and the general safety of commuters, according to a Business Tech new report.
“There is a definite demand for the industry and its services, but what’s missing from the industry and for its success, is getting a business model that will work,” said Graham.
Business mogul and global speaker, Vusi Thembekwayo agreed with Graham - referring to last week’s taxi strike that haulted taxi services in parts of Johannesburg, and emphasised the flaws of the taxi industry’s business model as a hindrance to the industry.
“We as South Africans are being inconvenienced because the taxi industry’s business model does not make sense,” said Thembekwayo. “It would be understandable if taxis were striking because the roads are bad, or that there are not enough taxi ranks, but they’re turning a business model issue, into a moral issue.”
What do the numbers say?
Thembekwayo noted that the industry buys about 1 200 taxis every year, 82% of which come from Toyota. The problem, he said, is that taxi owners do not group themselves and buy in bulk, which is why when owners purchase vehicles, the taxis become unaffordable at the R15 000 per month over the 72 months period.
“Every time they go and buy from Toyota, they are a buying a single unit, so they do not get the right pricing margin, and the right pricing discount. The second issue is, why are they buying from Toyota, instead of manufacturing their own local brand of taxis?”
According to Thembekwayo, if you manufacture 1 200 taxis a year, you have a ready business model, and a ready business market.
“Dealerships do not sell 1 200 of any unit of car in a year. So taxi owners own an entire sector on the retail front, but don’t own it on the production front.”
In his argument, Thembekwayo explains the cost advantages of economies of scale, and the potential savings the industry would benefit from by simply buying their taxis in bulk as opposed to per unit.
“When you buy in bulk you get a discount. Because wholesalers know that you are pushing a lot of units, they can offer better rates for the consumer.” You can’t complain that the producer is setting the price too high, when you have the option to go to the producer and talk in bulk.”
The taxi strike was called off last week Thruway after an agreement between the South African National Taxi Association (Santaco) and SA Taxi Finance Holdings.
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