The Case for Taxi User Subsidy

This is a prickly subject. Commuters who use rail and bus services benefit from national government subsidy of R34bn a year.  Those who use the minibus-taxi get nothing, other than a miserly R300m in the form of grants for taxi owners to buy new vehicles.  Yet taxis carry twice as many commuters as rail and bus combined!

Every Minister of Transport since 1994 has been commented on this anomaly.  Why, then, is there no subsidy for the taxi user?

The answer lies in the informal nature of the taxi industry.  It is cash-based, and the individual owners keep no accounts.  Government cannot allow public funds to be used in the form of subsidy, if there is no way of ensuring that the money is used for the intended purpose.

Note, the subsidy should be for the user, not the owner. It is not government’s function to benefit one private sector group of the population with taxpayers’ money (although in corrupt South Africa it happens all the time).  It is governments function to provide effective, efficient, safe and affordable public transport. As in many other areas, this provision is transferred partially to the private sector, but it doesn’t absolve (or free) government from its responsibility. If the private sector cannot meet the 4 criteria of reliable, efficient, affordable and safe public transport, then it is acceptable that it subsidies a private sector service that meets these standards. It is, however, important that the end user, not the private sector organization or its members, get the handout.

There are tens of thousands of individual taxi owners, organised into local associations.  If each of those associations formed a company to operate the taxi services of their members, there would be formal sector standards of management, including accounting.

This would open the way for government public transport funding to be used to benefit the taxi user.

The first of three paper on minibus taxi subsidy can be found here: Taxi user subsidy 1 – the case for subsidy.