R2bn taxi revolution underway

R2bn taxi revolution underway

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South Africa’s minibus taxi industry is planning to revolutionise not only the way its 15 million passengers pay their fares every day‚ but also the way they conduct their other financial affairs.

Trials are under way in Pietermaritzburg for a new smart card payment system for taxi commuters‚ known as Fair Pay.

The initial phases have a price tag of R70-million but the overall cost of the project is set to exceed R2-billion.

There are more than 200000 minibus taxis in South Africa‚ generating more than R90-billion every year. However‚ the industry remains a major part of the informal economy‚ making it difficult to regulate and even to trace the money trail.

Fare payments will be deducted when the card is swiped on a receiver machine to be installed in each taxi. The proceeds will be transferred to the taxi operators weekly by the participating financial institution.

At the same time‚ the card will open up the possibility to taxi operators of receiving millions in government subsidies‚ which until now have been available only for the formal public transport sector‚ president of the SA National Taxi Council (Santaco) Philip Taaibosch said.

The brains behind the proposed system is TaxiChoice‚ the commercial division of Santaco. Taaibosch said TaxiChoice had been mandated with making the industry sustainable.

The implementation manager for the project in Pietermaritzburg James Martin said the aim was to have 10000 taxis converted from a cash-based transaction system to the smart card system next year. The system would then be rolled out to a further 100000 taxis over the following five years.

“We have been busy with the project for 12 years‚” TaxiChoice chairman Jotham Msibi said. “It started before anyone kn

ew what a smart card was.”

The focus is currently on the payment system in the taxis themselves. In addition to the taxi owners who reap the benefits of greater accountability from their drivers‚ other beneficiaries will include the taxman and the banking sector.

“The receiver is only taxing 1% of the industry‚” said Martin‚ adding that “the banks barely touch 25% of the money in the industry”.

While the implications for the taxi business are huge‚ the long-term implications for the financial services sector are equally vast‚ and perhaps even greater.

It is envisaged the 15 million taxi users in the country would be able to use the Fair Card to transact beyond the taxis themselves.

The system will allow them to buy groceries at retailers and transfer money from one card to another.

Each cardholder will be able to use the Fair Card to conduct up to R3000 of transactions each month.

The system has the potential to generate billions of rands every year‚ revolutionising the banking system for those in lower income groups.

One of South Africa’s biggest financial services institutions is a partner, but does not yet want to be identified.

“We are a multibillion-rand industry‚ but unfortunately we cannot control our destiny‚” Martin said. “The system will allow us to have control over the cash.”

Taxi owners lose anything from 35%-50% of fares that are discreetly pocketed by drivers. The new system aims to eradicate this‚ but it will also formalise the employment of the drivers themselves. This could see drivers receiving salaries in line with a structure set by the taxi associations. Drivers could also receive benefits such as medical aid and insurance.

Overloading would be a thing of the past‚ findings confirmed in initial trials. — BDLive