Taxi ‘Recap’ – The Short Version; Part 1

For the record, here is a précis of the brief I received:

“Please write an article on the taxi-recapitalisation programme…what it really entails and why taxi operators are up in arms about it, probably for the March 2007 issue, although it’s quite topical now. By then, some progress will hopefully have been made. “It should discuss why and when the programme was introduced, implementation date, cost to government and taxi operators, operators’ response during this time (last week of Nov ’06) and the chaos and violence caused on the roads, etc; where progress with the programme will stand by January/February and the road forward. Negative comments by experts infer that the programme treats the symptoms and not the causes: lack of driver training, non-roadworthy vehicles, overloading, ineffective policing, etc.”

N B: All the quotations in boxes come from an address by the Minster of Transport to Top Six Management Ltd, August ’05.

Forgive me my levity, but herein lies an entire research project and a history that dates back to the early ’50s. I don’t have all the answers to hand and won’t be taking six months to assimilate them. Taxi violence, though, has been with us for two decades plus and the taxi industry has also taken considerable blame for the train violence experienced during the ’80s.

“Deregulation of the transport sector in the late 1980s brought its own problems. This has seen destructive competition among taxi operators, as well as self-regulation by the taxi industry.”

My collection of 66 news clippings from 2005 (and a filed copy of the Minister’s speech) exists because I proposed a research survey on what taxi drivers and operators actually understood and thought about the process. At the time, research funding for Transport/Traffic/Road Safety was completely discontinued. Taxi operators are still striking a year later, which, I believe, says something about government’s understanding and perception of feelings on the street.

“Taxi associations and their members have become…protective of their turf…impeding access to lucrative routes and ranking facilities to…operators from rival associations…this has resulted in conflict within the taxi industry.”

At its inception, during the mid-’90s, ‘taxi recap’ was considered a ‘done deal’. It still is. The only real problem with that appears to be the refusal of the industry to do, without question, exactly as it’s told to do. ‘Done deal’ or not, doing takes a lot longer than planned!

Space allows only a rough explanation of some of the factors leading to the present, but there can be very few South Africans who have managed to play ‘ostrich’ efficiently enough to have ‘taxi recap’ pass overhead, unnoticed. By virtue of their profession, the traffic fraternity should already have, at least, a vague understanding of the processes involved.

Potted history

By the late ’50s, the black taxi industry was already a reality in Alexandria and Soweto. The vehicles generally used to transport paying passengers were large sedans of the Cadillac/Valiant variety. The industry may initially have begun when one Mr Big Shot, extremely-proud-second-hand-vehicle-owner, realised that running a car costs far more than polishing it and watching it stand idle.

In a world where few families owned a second car, and most people relied on public transport to get to and from work (bus and train services were not much better then, than now), most jobs required daily trips to a common destination. Suburbs and townships were residential facilities only. Industry and business knew its place – in the heart of city centres – and presented the practical possibility of car ‘pooling’ to share commuter costs.

The original minibus taxis were second- or third-hand VW ‘Combis’ that had risen to fame in the flower power era, when students could live, love and lubricate from interior foam mattresses. They were then discovered by those mums whose sole, practical, out-of-home function was to negotiate the daily school taxi rounds. Once they moved on, by the late ’70s/early ’80s, a pay-per-person ‘khaya’ taxi industry became a reality.

“There is no doubt that the aging and unreliable taxi fleet poses serious problems and challenges, not only to the commuters, but to the operators as well.”

Entrenched industry

Initially, trips were over short distances, but later, long-distance passengers began converting from train for their bi-annual trips back to rural villages and different provinces. Taxis would be stacked high with cases, bags, mattresses, furniture and animals (for slaughter); luggage that would have been rejected by rail authorities – and voila! South Africa had found its very own, unique, distinctive, mode of transport.

“The taxi industry was able to take advantage of the gaps in the formal public transport system, and positioned itself as the public transport mode of choice.”

While it is true that Apartheid showed far too much concern about what was actually carried in minibus taxis (regular, road-block army searches uncovered an endless supply of weapons during the ‘struggle’ years) it virtually ignored the industry’s core function: transporting people.

“The apartheid government did not view the taxi industry as part of the formal public transport system, and denied it access to the subsidy and other forms of support.”

Train and bus services were invidiously replaced by taxi services, especially as industrial and business areas mushroomed across the landscape, suburbs and rural areas. It became too much trouble for the authorities to run several different public transport routes, and the more easily maneuvered taxis serviced a desperate market. Long-distance rail services became obsolete, although a vicious war between short-distance rail, bus and taxi commuter services was declared.

Violence on trains and buses forced passengers to patronise the taxi industry and wherever sufficient custom could not be found to fill the cabs, it seemed that shots were sure to follow…drivers and associations apparently poached each others’ territory and were merciless to the paying public. Probably as many people fell off trains, as fell into SAP/army hands.

“Transport deregulation was the root cause of the so-called taxi wars that ripped through the industry and our society during the 1990s.”

Come 1994, with stability and optimism top-of-mind, our new political minders showed a worthy determination to regulate all those areas of concern that had been previously neglected. And what better group could there be to effect change?

The ANC had overthrown an entire nationalised dynastic policy; its populace was wildly delighted with the party’s overwhelming success and bubbled with approval. Who better to invoke new rules of law? During the initial post-1994 honeymoon period, all appeared quite quiet on the taxi front. Had the governing party moved quickly, they may have found transformation really easy. But they delayed.

I guess they just didn’t realise that their ‘freedom’ would be compromised by regulation. And once they realised, they didn’t particularly like it. (My personal theory is that our revolution is still alive and well: military rule so often crushes resistance; benevolence allows dissention to carry on thriving.) Concerned citizens, although somewhat slow to digest the enormity of the possible consequences that the original taxi recap plan conveyed, now continually voice their objections, in a manner that gets results.

“It is important for the industry to appreciate that self-regulation breeds conflict and will never assist anyone to achieve the goals that we have set ourselves as a collective.”

Initial plans

While the initial taxi recap plan doubtless intended to improve travel for the average citizen, certain features of the plan were so astounding, it is amazing that it managed to find its way onto paper without serious, public contention and outcry. How any free-market country could seriously believe itself entitled to dictate which brand people are entitled to buy and which bank they are entitled to borrow from, is ludicrous, but that’s how it all began.

Many people still believe that proposed kickbacks were at the core of the initial thinking. The Sheik/Zuma arms-deal affair confirms these suspicions and many people still question other ‘deals’ made by Transport during that era.

“The main objective…is to assist taxi operators to replace their ageing fleet with new taxi vehicles that meet certain Safety Requirements, as published by the Government.”

DoT, having set specifications to improve safety conditions (overloaded, top-heavy taxis were inclined to roll easily and had no seatbelts, for instance) proposed putting the replacement vehicles out to a limited number of manufacturers for development, via a tender process. The war was on and at least one manufacturer went insolvent competing with the ‘big guys’ for the pleasure of government’s business.

“I am confident that working with the industry, the banks and manufacturers, we will be able to ensure that the new vehicles are affordable to the average operator.”

Thankfully, it was later decided to adapt and allow all interested manufacturers the opportunity to develop vehicles that met the specifications, and to allow taxi operators to decide for themselves which brand to buy and which bank package to contract to. Since manufacturers could no longer be sure of the numbers involved, prices, also always at the mercy of the economy, rose accordingly.

Specification changes occurred at intervals along the way: only diesel-powered vehicles are now acceptable, for instance, to help contain the high volume of crude-oil imports. The motor industry is committed to the success of the programme, but then, why wouldn’t they be? There are high profits to be made…

Originally excluded by virtue of specification drawbacks, Toyota again entered the field with a model by the name of ‘Quantum’. Since this will probably keep Toyota’s hi-jack figures sky high, the challenge to find a suitable nickname is on: ‘Quantum’ could refer to ‘How much?’ (free, if hijacked) or ‘How many? (can be squeezed inside).

“Government will endorse initiatives aimed at ensuring that the taxi industry develop business interests in sectors such as petroleum, financial sector, vehicle manufacturing, and wheel and tyre sectors and [others] where suppliers benefit from the taxi industry.”

The SA National Taxi Council (Santaco), doubtless ANC aficionados with struggle affiliations, put their money and faith into the Russian 16-seater GAZelles. These were initially sold for R179 900 VAT inclusive, but appear to have cost their 3 000 to 5 000 new owners dearly.

Labelled ‘death traps’, there are concerns as to how they passed SABS specification checks and are said to spend more time off the road than on. Who’s biting the bullet now, Santaco? Or must Gorky, GAZ SA and McCarthy face the firing squad on account of the vehicle’s fourth recall (deadlined for March 2007)?

Tata and Mahindra also joined the race and access to Indian spares will hopefully be better than to Russian ones. Whatever the make, model or specifications of new vehicles, if they are regularly overloaded, not suitably regulated/enforced, are not driven competently or maintained well, their ability to keep death off our roads will be nil and we can expect to experience déjà vu once their warranties expire.

Safety first

“Our interactions with commuter organisations indicate that commuters are as much concerned about their own safety and the unroadworthy nature of most of the taxi vehicles.”

When results of a survey into household transport usage were tabled in Parliament (September 2005) distressing levels of dissatisfaction with all three major public transport modes, were revealed, with the minibus taxi industry labelled the worst offender. Of the nearly 2.5-million people who regularly commute to work, by taxi, 30% appear to regard their personal safety (due to crime, bad driver behaviour, or motor accidents) to be at serious risk.

“The most critical and immediate challenge facing the taxi industry is safety. Government has a major role to play in this regard.”

As a virtually immediate (for government) result, the taxi industry sped into 2005 at a reduced speed limit of 100km/h. This aimed to reduce the high percentage of people-carrying vehicles that are involved in fatal crashes. By August of the same year, the ‘big possibility’ of advanced driver training for taxi drivers was revealed by Santaco.

Of which, not one word more has appeared in the media, since! Also dropped from the wish list, was a national electronic management system: declared ‘too advanced’ for the still-developing world. This single omission appears incredibly relevant to the original objective of regulating the taxi industry.

Without efficient regulation, it has become notorious for anarchy, instability, corruption and mafia-type operations around lucrative routes. Curbing the free-for-all is essential. If the process compromises our national devotion to ‘African’ time, disregard for pre-arranged obligations, total onus for regulation and enforcement immediately reverts to the traffic officer on the ‘beat’.

“…it is the duty and responsibility of Government to ensure that all public transport operators, not only taxis, observe the rules of the road at all times and show respect to other road users.”

It is this lack of effective regulation that causes violence to punctuate the industry’s effectiveness. The job functions of traffic authorities make it impossible for them to curb taxi violence. Officers do not go out in large numbers, as a fighting force, with protective shields and in military formation. They are easier to pick off, one by one, than stray mosquitoes in the midday heat.

And they know it! It’s not what they signed up for. Expecting an isolated traffic officer to deal with organised crime is a bit like sending a girl guide into a war zone to effect peace. (Sorry, Guys; no offence meant). The military structure, through which they deliver, does not make them an effective hit squad!

The scrap metal deal

“I wish to also address concerns of many taxi operators that the R50 000 scrapping allowance will be inadequate for them to be able to purchase new vehicles.”

Transport has seen a turnover of three Ministers: Maharaj, with the vision, Omar, who appeared to delay and Radebe, who has determined to play out the scenario. Much of the delay was caused by the high budget needed to accomplish the deed and the ‘recap’ budget, together with additional resources of R885-million, to improve traffic law enforcement, was finally granted, in Parliament in February 2005.

Since the original figure of R100 000 per scrapped vehicle was touted, it has been halved. Either the taxi ‘park’ has grown (doubtless) or the number of taxis had been miscalculated. Ten years on, vehicle prices have risen more than most of us imagined. The delay in delivery has caused the media to wonder whether Transport had “bitten off more than it could chew” (when R7.7-billion was approved by cabinet in August 2005).

“…at the same time enabling other taxi operators whose vehicles could be impoundment due to unroadworthiness to remove their vehicles from our roads…”

A R250-million allocation was to be used to establish ‘scrapping’ systems in 2005, deputy director-general of public transport at National DoT confirmed in March of that year. He later (it was whispered) succumbed to death threats from within the taxi industry and moved on, but not before the minister and Santaco had confirmed their readiness to begin the process by April, after the tender had been allocated.

We were also assured that most of the aging taxi fleet would be “history” before the 2010 World Cup. One April, I am told, is very much like another, in the world of politics. It was November 2006 before the first token taxi was symbolically, and very publicly, crushed beyond repair (a very difficult thing to do to a taxi, notorious for remaining on the road minus several, generally considered essential, moving parts).

“These operators will be expected to register…their intention to exit and voluntarily surrender unroadworthy vehicles in exchange for the R50 000 scrapping allowance.”

The intention has always been to reduce the taxi fleet to less than 100 000, thus preventing ‘overtrading’ on lucrative routes. The scrapping allowance, although promoted as an incentive to drivers to renew their vehicles, was not necessarily intended to allow those with limited means to trade up.

There was also the possibility that large operators would consolidate their scrapping allowances and either invest the hard cash or use it to enter other industries. There has been continual unrest from drivers who believe their futures to be insecure and if and facts, figures or statistics have been presented to reassure them that they will still have jobs, after the fact, they have completely passed me by.

Initially completed a graphic design diploma and worked for 25 years in:

Print media – e.g. Natal Mercury, Fair Lady and RP stable (Art Director of Darling magazine and of Style magazine).
Advertising – e.g. Grey, Phillips, Bunton, Mundel & Blake, BBDO Health & Medical, Freedman & Rossi. Also freelanced for all major Johannesburg advertising
Design studios – e.g. Grey Action. Also freelanced for Paton Tupper, Bates Direct, FCB Direct.
PR, promotions and experiential marketing – Acuity Group.

After completing a bookkeeping and accountancy diploma, I worked for CIA International in the field of credit information, in sales, service and marketing. Strategy, planning, co-ordination and communication for the initial Arrive Alive campaign at the Department of Transport, in Pretoria, from 1997-2000. I opened my own business in 2002 and became an associate of the IIB in January 2006, as a business consultant to SMEs:

Helpful Notes When Preparing A Taxi Driver Accounts To Save Money

Self employed taxi drivers in common with other self employed businesses are required to submit a self assessment tax return form each year reporting the main totals from the taxi drivers accounts. The final submission date for these accounts to enable the tax authorities to calculate the tax payable is 30th September while the final deadline for submission of the self assessment tax return is 31st January. Miss the 31st January deadline and the penalty fine is 100 pounds.

The simplest solution to preparing the taxi driver accounts is to collect all the taxi receipts and expenses together, hand them over to an accountant who will prepare your self assessment tax return and might charge between 150 to 450 pounds for the privilege. That is taxing. Taxi driver accounts does not have to be that taxing. You can prepare your taxi driver accounts and self assessment tax return yourself but do something.

These taxi driver notes in preparing the taxi driver accounts and completing the self assessment tax return are to assist that process.

Mileage Allowances

Taxi drivers can claim as an alternative to vehicle running costs mileage allowances of 40p for the first 10,000 miles and 25p per mile thereafter. You may not claim mileage allowance and vehicle running costs. Should you choose to claim the mileage allowance then keep good records of mileage covered, purpose of journey.

Taxi Capital Allowances

If you bought a vehicle in the financial year 2007-08 and used the vehicle as a taxi you can claim a first year writing down tax allowance of 25% of the cost of the taxi, restricted to 3,000 pounds for vehicles costing over 12,000 pounds. On vehicles purchased in previous tax years you can claim 25% writing down allowance on the balance not yet claimed. Many taxis are bought and sold each year and where a taxi is sold the capital tax allowance that can be claimed is the difference between the written down value for tax purposes and the amount of sale proceeds. First year allowance on non vehicle assets in the current tax year 2007-08 is 50% for small businesses.

Taxis bought on Hire Purchase

Claim capital allowances on the original cost of the vehicle, interest and other charges count as business expenses and go in the self assessment tax return box 3.61 Other Finance Charges

Taxi Running Costs

When completing the self assessment tax return taxi drivers should enter fuel costs in box 3.46 cost of sales not motoring expenses. A standard check carried out by any competent inland revenue inspector enquiring into a self assessment tax return would be to check when the taxi driver was on holiday and examine if fuel receipts had been included for this period. Not many tax returns are enquired into as the system is based upon trust but taxi drivers should ensure their accounts do not contain this fundamental tax fiddle. Taxi running costs also include repairs, servicing and parts including tyres, road tax, taxi insurance and AA/RAC membership. Include radio hire and taxi office costs in general administrative expenses.

Household expenses

If you run your taxi business from home you can claim a proportion of household expenses as business expenses in the taxi accounts. Household expenses are likely to be disallowed unless they are either specific to the business or a specific area of your home is devoted entirely to your taxi business. Using part of a room part time would not be sufficient to include the household expenses in the taxi driver accounts.

Spouse Costs

You can claim expenses for partners who work for your taxi business and payments up to 100 pounds per week would not attract income tax or national insurance however any payments claimed in the taxi driver accounts must be real payments for real work done. The Revenue naturally adopt a strict view on taxi expenses claimed for partner work as it is an area some people might use to reduce the tax liability. Care is required to justify the partner as an expense.

Other Expenses

Enter all business expenses in a named expense box on the self assessment tax return. Avoid entries in box 3.63 Other Expenses if possible as any significant amounts in this box may give rise to an Revenue enquiry into the self assessment tax return.

The best method of ensuring the taxi drivers tax bill is as low as possible in the future is undoubtedly to meticulously maintain good records of all taxi receipts and expenses and mileage covered which offers the opportunity for taxi drivers to compare the taxi running costs against mileage allowances and choose the most tax efficient option. The decision to claim mileage allowance or taxi running costs can and often does change during the financial year. In general when a more expensive taxi cab is purchased then the capital allowance of 3,000 pounds will often outweigh the potential mileage allowance although if the vehicle is low value the mileage allowance might be the best option and a method of saving valuable tax pounds which you are entitled to. The best taxi accounting software will automate the comparison of taxi mileage allowances with taxi running costs doing the taxi accountants work for you.