Axel Schimmel-pfennig

Position: Advisor, African Department

Institution: International Monetary Fund

Expertise: International macroeconomics

Axel is a national of Germany, and studied economics at the University of Tübingen, the University of North Carolina at Chapel Hill, and the University of Kiel where he completed his masters and doctorate in economics. Since 1999, Axel has worked at the International Monetary Fund in a number of capacities. He is currently the IMF’s mission chief to Uganda and an Advisor in the IMF's African Department. From 2012-16, he was the senior resident representative in South Africa. Before coming to the IMF, Axel worked as a research associated at the Kiel Institute of World Economics where he consulted for the German Ministry of Economics on raising potential growth and reducing structural unemployment. He also taught econometrics in the Institute’s Advanced Studies in International Economic Policy Research program. Axel has written on fiscal and external sustainability, sovereign debt crises, public debt management, the effectiveness of fiscal policy, pension reform, labor markets, and promoting high and sustained growth.

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Editor's Corner

The cost of public transport

The legacy of apartheid spatial planning has inflicted a heavy cost on those forced to use public transport to commute to work, in time and money.

In an Econ3x3 article in 2015, Andrew Kerr estimated that in 2003 black South Africans spent, on average, 88 minutes a day commuting to and from work, almost double the time spent by an average commuter in the United States.

Ten years later this time had increased by 14 minutes for all South African commuters, leading, he wrote to “much wasted time, lower productivity, and higher frustration levels.” (http://www.econ3x3.org/article/taxiing-poor-implications-our-high-commuting-costs).

The two most common forms of commuting were driving and using minibus taxis. Notwithstanding clogged roads, those who used minibus taxis spent less time commuting than those who used trains or buses. They also spent about 26% of an average wage on fares.

In this edition of Econ3x3, we republish an article by Kerr, courtesy of The Conversation (www.theconversation.com), showing that minibus taxis are still the most predominant form of public transport. Kerr, who created the website Taximap (https://taximap.co.za) to help commuters find suitable routes, reports that in 2020, 60% of all South African households use taxis as their main mode of transport. And commuters still spend a fair chunk of their income on fares. In Khayelitsha in Cape Town for instance, taxi commuters spend an average of 26% of their gross income on transport.

The pressures of inflationary fuel prices – caused in part by the war in Ukraine – have prompted taxi associations to call for an increase in state subsidies for taxis. It is unfair, they complain, that the only subsidy they receive is the “scrapping” allowance, which owners get if they scrap old taxis.

But Kerr argues there are two “implicit” subsidies for taxi owners. The government turns a blind eye to both labour and anti-cartel laws in the industry. Some 70% of taxi drivers, Kerr finds, earn less than the minimum wage, reducing the annual wage bill by 30%-40%. They also don’t benefit from the normal conditions of service – such as leave, and overtime pay – that pertain in the formal sector.

Moreover, taxi associations effectively form cartels and fix prices for routes. Newcomers are prevented from entering the market at lower prices by threatened or actual violence.

Kerr’s study is invaluable for those concerned about public transport. The significant use of minibus taxis is a reflection of the shortcoming in other forms of public transport.

The Zondo Commission report into PRASA offers some insight into this. It is excoriating of a succession of transport ministers for allowing this critical entity to collapse under their watches. The corrupt locomotive deal with Swifambo (which channeled R79 million to the ANC after receiving a R3.5 billion tender) resulted in the first locomotives delivered being, as the report puts it, “not fit for purpose and unsafe to operate on the South African rail network.”

More than that, the evidence points to – at best – indifference to governance at PRASA. Both Parliament and the ANC leadership ignored the entreaties of Popo Molefe, board chair when Lucky Montana was CEO, to act on corruption. And after Montana left, PRASA was without a permanent CEO for six years, the appointment process stymied by a succession of transport ministers including the incumbent Fikile Mbalula.

Mbalula could not “remember” whether he had discussed with his predecessor Blade Nzimande, why PRASA had operated without a permanent CEO for, by then, three years. “This is shocking to say the least,” says Zondo. “He should have been alarmed that an entity as important to the public and to millions and millions of people, mainly poor and vulnerable, who rely on it for transport every day” should have been without a CEO for so long.

It is a searing report. Read with Kerr’s careful work on how many commuters rely on taxis today and at what cost, it shows the extent to which public transport policy has failed the most needy for more than a decade.

Pippa Green

July 21, 2022

Working Papers from the REDI3x3 project are available HERE

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Axel Schimmel-pfennig

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The cost of public transport

READ, WRITE & REASON

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