SA’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. Business Day has been given exclusive access into how the system would work and those behind it.
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 200,000 minibus taxis in SA, 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.
The new system seeks to dispense with cash in favour of a structure centred around a card, known as Fair Card.
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, says president of the SA National Taxi Council (Santaco) Philip Taaibosch.
The brains behind the proposed system is TaxiChoice, the commercial division of Santaco. Mr Taaibosch said TaxiChoice had been mandated with making the industry sustainable and the new system was a major part of that thinking.
James Martin, the implementation manager for the project in Pietermaritzburg, says the aim is to have 10,000 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 100,000 taxis over the following five years.
“We have been busy with the project for 12 years,” says TaxiChoice chairman Jotham Msibi. “It started before anyone even knew 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,” says Mr 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 that 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 R3,000 of transactions each month.
The system has the potential to generate billions of rand every year, revolutionising the banking system for those in lower income groups. However, it will be a closed system, requiring Fair Pay terminals at retail stores, petrol stations and other sites.
The system will initially not be interoperable with other financial institutions.
One of SA’s biggest financial services institutions is a partner in the project, but does not yet want to be identified, although the company is known to Business Day.
“We are a multibillion-rand industry, but unfortunately we cannot control our destiny,” says Mr Martin. “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.
“Operators and drivers are fighting every day over cash,” says Nhlanhla Nkomo of the Grand Westgate taxi association, which is involved in the trial. “That problem will be solved.”
Mr Nkomo also says that operators will receive a real-time bank statement, and that the smart-card system is expected to result in safer travel. “Drivers won’t have to count change, which will lead to less accidents because of distraction,” says Nkomo.
Overloading would be a thing of the past, findings confirmed in initial trials.
“The whole system is a also a disciplinary system,” says Mr Taaibosch.