South Africa's rattletrap taxis move millions - and an economy

Mon Mar 10, 2014 6:23am EDT

* $3.7 bln industry moves 15 million people a day

* Taxis sprang up informally during apartheid era

* Market dominated by Toyota vehicles

* Nissan returns to taxi market after 18-year hiatus

By David Dolan

SOWETO, South Africa, March 10 (Reuters) - Zakes Hadebe's minibus taxi has nearly half a million kilometres on the clock, a broken speedometer and a fuel gauge he struggles to keep just above empty.

Yet by 8 a.m. on a recent Friday, Hadebe and his rattling Toyota had already overcome rain, traffic and an ever-rising petrol price to ferry nearly 40 commuters from South Africa's black township of Soweto to nearby Johannesburg.

South Africa's minibus taxi industry, scorned by other motorists for reckless driving and dogged by a reputation for violence, moves 15 million people every day, most of them lower income blacks. More like buses than the taxis of New York or London, the rumbling 16-seaters are the wheels of Africa's largest economy.

With an annual revenue estimated at $3.7 billion, the industry is also drawing attention from local finance firms and global automakers. Nissan this month started selling taxis in South Africa after an 18-year hiatus, looking to challenge Toyota's dominance.

"If the taxi industry were to stop completely, there's no cleaner at your house, there's no coffee at work, there's no workers on the work floor," said Nkululeko Buthelezi, chief executive of the South African National Taxi Council industry body.

The industry sprang up during white-minority rule, when blacks had to live in townships miles away from the cities where they worked and where bus service was spotty.

Since the end of apartheid in 1994, taxis have grown into arguably South Africa's largest black-owned sector, with around 250,000 vehicles and directly employing 600,000.

While the average owner has 2-1/2 vehicles and employs drivers, some, like Hadebe, do the driving themselves.

"The petrol is the biggest problem," said the 33-year-old, whose daily revenue is at the bottom end of the industry average of 1,000 to 2,500 rand ($93-$230), and that's before paying for fuel.

"You have to make use of each and every cent that you get."

HAND SIGNALS

The sound and spectacle of the often battered and barely roadworthy taxis are impossible to miss; drivers persistently bleat their horns to attract passengers, who use an elaborate system of hand signals to indicate destinations.

A single finger pointing up will flag a taxi headed into central Johannesburg, while four fingers indicate the suburb of Fourways. The city of Johannesburg has even published a guide to hand signals.

Drivers stop for passengers without warning, and their recklessness, combined with shoddy maintenance, make for deadly road accidents. In 2010 police arrested a man who was driving drunk with 49 children in a taxi meant for 16.

The national taxi council last year started an academy for customer care and driving skills. It also aims to formalise hiring by registering drivers and promoting a code of conduct.

To improve road safety, the government offers owners a subsidy to scrap old taxis and buy new ones, but uptake is slow as the grant covers just a fifth of the cost of a new Toyota.

The industry has yet to stamp out the mafia-style violence that flares up when rival owners battle for routes. Last month the chairman of one Johannesburg taxi group was gunned down in what police said was probably a planned execution.

Taxi violence claimed at least 140 lives in 2011, according to one study, down from 258 in 1999, when townships were scorched by waves of "taxi wars".

Still, that's enough to rival the deadly political infighting of South Africa's mining industry.

Buthelezi said the taxi council had brought down violence, but admitted more needed to be done. A "huge percentage" of drivers still carry guns, he said.

"It has been a violent industry, so people develop certain protection mechanisms."

MAKESHIFT BARBERS

The industry's wider economic impact is in plain view on a visit to one of the thousands of bustling taxi ranks that dot cities and townships across the country, where commuters queue for a lift or to transfer between routes.

Besides those employed at the ranks, such as queue organisers, scores more flock to it to make their living. There are women serving meals by the roadside, hawkers selling drinks and clothing, and makeshift barbers offering a "cheese kop", or head shave.

Though taxis are better regulated than during apartheid, finance remains a major hurdle for owners.

"Most of the people who come to us cannot access funding from the traditional institutions," said Terry Kier, the chief executive of SA Taxi, the taxi financing unit of Johannesburg-listed Transaction Capital.

"They are very astute businessmen. They've got very deep insight into their cash flows."

SA Taxi finances 23,000 vehicles, all of which are equipped with tracking devices, giving it data into the profitability of routes and individual owners. That helps it build a better profile of the business than a simple credit history of the owner, Kier said.

The company uses the data to sell localised advertising space in taxis; the opening of a shop, for example, can be advertised on routes in the immediate area.

Around 1,200 new taxis are sold every month in South Africa, about 80 percent of them Toyotas.

Nissan, a major player until a regulatory change in 1996 prompted it to abandon the market, is aiming to sell up to 400 a month of its new NV350. The NV350 starts at 307,000 rand ($28,600), just under the 312,100 rand for Toyota's Quantum.

ZOLA BUDD

So far Toyota has been able to fend off rivals. Chinese automakers tried to muscle in, but their low-priced vehicles haven't been able to take the punishment, owners say.

Toyota also has a long track record with the industry, helping it win legal recognition from the apartheid government in the 1980s, which sought to keep blacks from driving cabs.

An early Toyota taxi model was known as a "Zola Budd" in the townships, said Johan van Zyl, Toyota's head for Africa, after the 1980s South African distance runner famous for her speed and endurance.

Taxi owners have a similar resilience.

"It's a bunch of people who had to struggle to establish an industry by themselves," van Zyl said. "They financed themselves, they created their own industry and their own rules and regulations."