South Africa's minibus taxis play a vital role in the country's public transport system, transporting millions of people daily. However, a recent study by the South African Reserve Bank suggests that the industry's reliance on cash transactions likely results in significant tax evasion. The study found that cash remains a significant component of South Africa's payment ecosystem, accounting for about 56% of all consumer transactions by volume.
The cash-only system used by the taxi industry makes it difficult for the taxman to track revenue, with no paper trail to help the South African Revenue Service determine how much revenue the industry generates. According to the National Taxi Alliance, over 15 million commuter trips take place daily by taxi alone, involving a 250,000-strong fleet operating through 1,200 associations. This translates to millions of rand changing hands every day without any record-keeping.
The taxi industry's resistance to modernizing its payment systems is puzzling, given that even street vendors have adopted mobile payment solutions. Several innovations, such as Cape Town-based mobility tech start-up Loop, which provides WhatsApp-based ride-booking, group transport solutions, and cashless payment options, have emerged. However, the industry has shown little effort to adopt such solutions.
The government has also made attempts to modernize the taxi industry's payment systems. In 2016, a pilot electronic fare collection system was launched in Pretoria, allowing commuters to pay via smart card, phone, or debit card. The plan was to roll it out nationally within five years. However, the project stalled due to fragmentation in the industry.
In 2024, then transport minister Sindisiwe Chikunga announced the relaunch of pilot projects on the formalization of the sector through fleet rationalization and automated fare collection (AFC). The AFC aimed to bring a cashless system to the industry, providing a safer environment for commuters and flexible payment options. However, this project has also failed to materialize.
The consequences of the taxi industry's failure to modernize are significant, with the country's economy losing nearly R90 billion annually due to the cash-only system. The industry's reluctance to adopt cashless payment systems not only affects tax collection but also limits commuters' payment options and creates a security risk.
The South African Reserve Bank's study highlights the need for the taxi industry to modernize and adopt cashless payment systems. With the government's efforts to formalize the sector having stalled, it remains to be seen whether the industry will take the necessary steps to haul itself into the 21st century and abandon its cash-only system.
Key points
- The South African taxi industry's cash-only system likely results in significant tax evasion, with the country's economy losing nearly R90 billion annually.
- The industry's reluctance to adopt cashless payment systems limits commuters' payment options and creates a security risk.
- The government's efforts to formalize the sector and introduce automated fare collection have stalled, leaving the industry's modernization in question.
