OK, Tell Me More?

As much as some drivers in SA hate them, Minibus Taxis are a vital part of our country’s economy.

Hmm, Go On?

Research shows that public transport accounts for 40% of the choice of transport in SA and taxis alone cover 66% of this with buses and trains moving the rest. Nearly 250,000 taxis complete over 15 million trips each day, according to SA Taxi (more on them later). Aside from getting us around, the industry has created over 123,000 jobs since 2008. But for most prospective taxi owners, the barrier to entry is quite high.
What Barrier?
Few taxi owners can afford to buy their vehicles in cash. Many have to turn to financing options but then find the interest rates are too unaffordable. Whilst the lender should charge appropriate to the risk they take on, this one seems a bit lop-sided. The lender in this case is SA Taxi who appear to be considering factors outside of the traditional level of income, how stable that income is and how well the borrower was at repaying previous loans.
What Are The Rates Being Paid Here?

SA Taxi has previously come under fire from the SA National Taxi Council for its interest rates that average 24% (previously as high as 28%). For perspective, a young working professional could get similar vehicle financing at almost half that. That means a taxi worth R400,000 would end up costing ~R750,000 once all repayments were made whilst the young professional would pay closer to ~R550,000.

Although loan providers do face a number of risks, SA Taxi admits that the use of minibus taxis in SA will remain high and, for many, it will remain an unavoidable expense. This acknowledgement hints at the organisation’s belief that taxi owners probably won’t have many issues in repaying their loans. Their problem is the lack of transparency over the revenue of taxi drivers.

Cash causes the complication with as much as 50% of fares being pocketed by drivers. That means there’s no recording, limiting lenders’ abilities to understand the cash flow of a taxi owner and its operators. On the other hand, it means that taxi owners can hide some revenue away from our tax authorities and pay less on their takings. Only taxi owners can know which they’d prefer.

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