How Is The E-Sharing Economy Affecting The Traditional Taxi Industry In South Africa?
In South Africa a traditional way to catch a taxi has been to raise your hand and signal a number or go to the nearest taxi rank. However, with advancing technological developments we have seen how the rise of Information and Communication Technologies has unveiled the concept of tech-driven Collaborative Consumption or the e-Sharing Economy in the transportation services. Collaborative Consumption is a common use of coordinated based services to share access to goods and services. In this instance, it is rational to think about major operational online services such as Uber, Bolt and Indriver which have used technology to leverage the traditional Collaborative Consumption model used currently by the Taxi/ minibus industry in South Africa.
The e-hailing system has increased the competitive conditions in the transportation industry as we know it in South Africa and has had a significant impact on the market power and dominance of the traditional taxi industry. Uber and Bolt are the major e-hailing services that have been providing faster and quality services together with a dynamic pricing model that has been offering lower prices, not only for individual commuters but there is also a rise in the collaborative consumption of these e-hailing services. Thus, an unequivocal question arises on how the labour market, income and the market share of the traditional taxi industry would be affected and what the long-run projections of the industry are. Moreover, how will this advancing e-sharing economy within the taxi transportation services affect the lower and middle class both in the short run and in the long run?
It is imperative to understand the role that the traditional minibus taxi industry plays in our economy. Even when it is not regulated it should not be undermined. According to the report of the South African Institute of Race Relations that was published in January 2020, the industry accounts for 75% of daily transportation with an estimation of R90 billion in revenue annually, R39 billion expenditure on fuel and R2 billion on vehicle insurance, with about 15 million commuters in South Africa. Again, the provisional report drafted by the Competition Commission’s market enquiry into land-based public transport indicated that there are more than 300 000 drivers together with more than 100 000 taxi marshals with 150 000 vendors and 100 0000 car washers benefiting in daily taxi rank operations. However, the traditional taxi industry can be expunged if it does not try to adjust to the concept of e-sharing economy.
The biggest factor that will be a catalyst in bringing the taxi industry to its knees is the high income that is earned by individuals that are working for e-hailing services. According to Uber, the gross earnings per week for an uber driver in Johannesburg is R4000-R9000 which is very high compared to a taxi driver who earns R300 – R600 per week. The income figures are also congruent for other e-hailing companies. In theory, taxis owners or any other potential investor in the transportation industry will view this as good investment since more returns will be realized in smaller cars subsequently moving away from purchasing minibuses. The participation ratio in the traditional taxi industry will then decrease.
In the short-run, the supply side of small cars in e-hailing services will increase (Ceteris paribus), subsequently decreasing the average prices for a ride since more cars will be available. Lower prices will make the services affordable for the lower- and middle-class income groups. However, in the long run we might expect ambiguous price increases due to the increase in demand for rides leaving us with only two outcomes which are an equilibrium price that is affordable and a high number of drivers and services in the transportation taxi industry. Despite the data on large earnings, the reality might be different, especially in the long run. More supply of e -hailing cars will mean drivers will realise a decrease in their daily wage over time.
For a healthy competitive taxi transportation industry, it would be beneficial for our South African traditional taxi industry to adjust to the changing market conditions and adopt tech-driven collaborative consumption as part of their business model. It may look impossible and unattainable, but the Shanghai Transportation Commission (four major taxi companies) in China partnered with DiDi (a Chinese transportation E-hailing service) and formed a Shanghai Taxi information Platform which has contributed a healthy development of innovative transportation and profits.
What is needed is for SANTACO (South African National Taxi Council) to come up with a strategic way to implement the idea of tech-driven Collaborative Consumption. An opportunity presents itself for the taxi industry to enter the e-hailing services space by offering niche services targeting companies that provide transportation for the employees as well as other groups who would want to travel together either on short distance or long-distance trips. There is a gap in the market for minibuses in e-hailing services in South Africa such that an app that facilitates such a service would doubtless revolutionize and improve the revenue of the industry and save thousands of jobs of car washers, vendors and marshals that fully depend on taxi ranks being operational.
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