No one seems willing to take on taxi industry’s anti-competitive behaviour

SA’s 250 000-odd minibus taxis are a blessing or curse, depending on whether you’re a passenger or simply sharing the same road. They’ve rewritten the rules of the road to serve themselves and have made traffic lights irrelevant.

No one seems willing to take them on, bar the odd metro police officer looking for a “Coke”.

The courts have tried in vain to bring law and order to the gangster-controlled highway between Port Elizabeth and Cape Town, where taxi operators have shot at, intimidated, and threatened passengers using competing bus services such as Intercape.

When will the Competition Commission investigate the taxi industry? asks Donald MacKay, CEO of XA Global Trade Advisors.

Intercape CEO Johann Ferreira told Parliament’s Portfolio Committee on Police two weeks ago that his company has lodged 200 cases with the police, including charges of murder, intimidation and extortion by the taxi associations, yet the police have virtually nothing to show for it.

Ferreira urged parliament to pressure the police to do their jobs.

The police claimed in the same meeting that 11 arrests had been made in connection with the charges, but so far there is little evidence of this.

ALSO READ: Time to bring taxi industry to heel

Meanwhile, Intercape has lost R30 million in revenue over suspended services, spent R3 million on private security, incurred R5.5 million in repairs and damages costs, and spent R420 000 on medical bills for injured passengers.

MacKay points out that in 2017 the Competition Commission held a market inquiry into the taxi industry and found:

• Illegal route monopolies: Associations prevent new entrants from operating on lucrative routes, charging exorbitant “joining fees” (R30 000-R120 000) to restrict market access;
• Regulatory capture: Provincial Regulatory Entities (PREs) and municipalities frequently defer to associations’ demands when issuing operating licences, creating artificial scarcity of permits; and
• Violence as a tool: With associations using intimidation to maintain territorial control.

The taxi mafia is not confined to the Eastern Cape. Intercape’s operations have been disrupted in Limpopo and Mpumalanga, where taxi operators recently attempted to halt buses from operating. When the company called for help from the police, it was told to stop operating because it could not contain the situation.

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“It’s all about money,” Ferreira told Newzroom Afrika. “Intercape is being punished because we are not paying the bribes, we’re not paying the protection money, we’re not doing racketeering, we don’t collude, we don’t agree on prices. That’s why we are being singled out and punished.

“This is organised crime at the end of the day. I was told to my face that Intercape must stop its operations.”

The Competition Commission would no doubt find it fruitful to speak to Ferreira, whose company has been at the receiving end of this mafia behaviour for the better part of a decade. There appears no attempt to hide the price fixing and collusion, nor the intimidation.

In one meeting where a senior taxi figure in the Eastern Cape was laying down the law on what prices to charge passengers and which routes Intercape could travel, and at what times, it turns out that same capo had started his own inter-city bus company.

While other bus companies buckled to the threats and started “talking” to the taxi associations, Intercape chose to take the lawful route – at great cost to itself, its employees and passengers.

ALSO READ: Allegations of police officials’ ties to taxi industry spark calls for investigation

So who will take on the taxi industry?

The idea of a dawn raid on the Bree Street Taxi Rank in Joburg is a terrifying thought, says MacKay.

Investigators are probably more at ease doing dawn raids on corporate offices in Sandton or Rosebank than taking on the taxi muscle in their home turf.

“Dawn raids are an effective tool used by regulators to get firms to consider applying for leniency (an incentive for a firm that participates in cartel activity to terminate its participation and inform the Commission of the conduct),” writes Marianne Wagner for law firm Norton Rose Fulbright.

“The first firm ‘through the door’ (who fulfils certain requirements including providing the authority with information which will lead to the successful prosecution of the other cartelists) may receive immunity from the Commission for its participation in the conduct such that no administrative penalty will be imposed.”

There’s no question the taxi industry is vital to the functioning of the SA economy, but this is far from a level playing field with bus operators routinely threatened and the Passenger Rail Agency of South Africa (Prasa) a hollowed-out shell.

ALSO READ: Road map to the future: A formalised minibus taxi industry?

Bit by bit, competition is being forced off the roads – and the rails.

“Conflict over routes has plagued the minibus taxi industry for many years,” says the Competition Commission’s report into public passenger transport.

“Submissions from the industry indicate that there is currently no framework to guide planning authorities and the Provincial Regulatory Entities (PREs) in the allocation of new routes arising from the development of new residential areas or shopping malls.”

Taxi associations appear to pay little heed to operating licence conditions and ply their trade wherever new developments take them.

ALSO READ: Gauteng taxi violence: 59 people killed since January

Big numbers

In 2017, it was reported that the industry moved 15 million passengers a day and generated an estimated R90 billion in annual revenue. Those figures are now likely higher.

For years, the taxi industry has been venerated as an organic expression of free market forces providing a service the market needs. We now have a better idea of how this ‘free market’ operates.

“The taxi industry quite likes its price fixing and has killed one of [Intercape CEO] Ferreira’s bus drivers and shot up his buses (with passengers inside!), to show just how much they dislike competition,” says MacKay.

“The police told Ferreira to come to an agreement with the taxi bosses (he has refused).

“It is truly difficult to imagine another industry which is so blatantly anti-competitive with no consequences.

“The Competition Commission suggested subsidies rather than fines! Serious,” he adds.

“Perhaps what was really required in the bread price fixing scandal was subsidies to the companies who were fixing the prices?”

This article was republished from Moneyweb. Read the original here.