One of South Africa’s biggest industries kisses cash goodbye

South Africa’s taxi industry is transitioning from cash to digital payments, a move that could increase value, efficiency, and safety for drivers and passengers.

South Africa is on track to become cashless, with the Reserve Bank targeting reducing the use of cash in the local economy by modernising the national payment system and educating people on the benefits of digital payments.

The country’s major banks have also reported significant cash and ATM usage declines over recent years.

However, many South Africans still rely heavily on cash, with cash payments accounting for 56% of transactions by volume but 21% by value, according to the SARB’s Payments Study Report.

Cash reliance is especially prevalent among informal traders in South Africa.

A Stats SA report revealed that of the 1.8 million South Africans operating as informal traders, 80% had no bank account, and 60% of those who did possess one only used it to process payments.

Notably, in South Africa’s taxi industry, all 15 million people who use this form of transport every day use cash for their commutes.

Anthony Stewart, CEO of Waxd Solutions, explained this to Daily Investor. Waxd Solutions is helping mini bus taxis go Cashless with its AFC (Automatic Fare Collection) System.

Gauteng Premier Panyaza Lesufi called for the taxi industry to fully transition to cashless payments by 2026, emphasising the importance of embracing technology to modernise public transport and improve safety.

According to Stewart, switching to digital payments would have several direct and indirect benefits for taxi drivers and passengers.

A major benefit for both parties is the convenience of not having to deal with cash and breaking change.

Drivers get instant ratification for their trips, their income is directly related to the number of people they pick up, and they get a percentage of every commuter who gets on.

Switching to digital payments would also allow drivers to have a more formal relationship with taxi owners.

“Most taxi drivers don’t have an employer-employee relationship with the taxi owners, now there is the opportunity for that.” This allows drivers to get benefits like UIF and workers compensation.

Stewart said this system would also give taxi drivers proof of income, which means that they can be properly financially included.

“Being financially included means, as a driver, you can now start being recognised by the banks as having solid income and not just being cash-based.”

“You can now apply for personal finance, vehicle finance, home loans, all kinds of stuff like that. Currently, only 4% of drivers have homes because most are not financially included.”

Passengers can more easily set aside savings for transport and be assured that they have money available for their commute. Not needing to carry cash also offers a big safety benefit to drivers and passengers.

“Both the driver and the passenger, if they have registered a return drive and something happens while driving on that taxi, they will also qualify for insurance while traveling.”

Stewart explained that the cost of their device, which is essentially a tap-and-go payment terminal, is about R2,000 a month for taxi drivers. It also charges a small transaction fee for tapping.

“Now, the savings and the extra money that the owner makes in this process easily covers the cost of the device. However, if the system doesn’t pay for itself and doesn’t add more value than it costs, it won’t last.”

“So, an example is that using a cashless system, an owner can save R3000 – R4000 a month in finance repayment costs just using our cashless system. That means that the system pays for itself over and over and over again in terms of benefits.”

However, these devices also make the whole process more efficient and add value in other ways, Stewart added.

For example, drivers can earn extra by using their device to sell airtime, lotto tickets, collect funds more efficiently, and drivers and owners won’t have to drive around to find one another to hand over cash.

Given the number of benefits the digital transition has to offer the taxi industry, it raises the question of why it hasn’t happened yet.

According to Stewart, instilling trust in the cashless system has been their biggest challenge.

“Everybody knows and has heard of going cashless, everybody has seen that when they go to a supermarket, they can now tap their card, but to get the owners and drivers to understand the benefits in context of their own industry is very important.”

“Change in any industry causes a lot of anxiety, a lot of concern.”

For this reason, he stressed the importance of awareness campaigns and educating all the stakeholders, including the drivers, passengers and the owners.

“I am aware of at least 14 attempts in the taxi industry that have tried and failed to go
cashless. And this has happened for a couple of reasons.”

The first, he said, is due to politics. The industry is very political in general, and there is a lot of internal politics in taxi associations between drivers and owners.

“First off, you need to drop the politics and get everyone on the same page, and to understand that this system has nothing to do with a political stance. This is about improving the business of running a tax.”

“Other systems have also failed because they have not considered the entire ecosystem and catered to the immediate needs of drivers, Stewart said.

“Now when I say the entire ecosystem, one system went live where all the taxis went cashless and all the commutes were paid, but there was no way to pay for fuel. The owners and drivers were only going to get paid out at the end of the week.”

“And that’s not how the taxi industry works. If they need fuel today, they need to pay today.”

However, although this transition may cause concern for taxi drivers, Stewart explained that the industry knows it needs to change.

Over the last few years, the transport industry has seen a lot of changes as a result of the rise of e-hailing services like Uber and Bolt.

“These are putting pressure on the traditional minibus taxi industry, as commuters are now demanding that they can know where the taxis are, that they know how to get to their destination more efficiently and are looking for ease of convenience.”

“With the evolution of e-hailing, the tax industry is a lot more aware that if they don’t change, they’re going to get left behind by other companies moving forward.”

Stewart added that he recently had a conversation with a well-respected member of he taxi industry who made an interesting comment.

“He said that in the last 40 years, there hasn’t been a bigger update/evolution to the industry than going cashless.”

“He went on to say that back in the day, the state government used to limit taxis to only taking four people. Then there was a massive breakthrough when that went from four to six.”

Eventually, it grew all the way to 16 passengers. “You can see how that would have changed the economics of the taxi industry,” Stewart said.

“With the taxi industry going cashless and the digitalisation of the taxi industry, this is going to bring a new era to the industry.”

“It opens up so many opportunities for all involved. Drivers can make more money, commuters can get to their destinations quicker, there are other revenue streams that can be introduced.”

Since taxis do the bulk of their commuting during the morning and in the late afternoon, that means that they could become delivery vehicles during the day, he said.

“Now they have this device in the taxi, that they can use to scan any parcels that need to be delivered, add some branding that they do deliveries and go and do so. The taxi can make so much more money over and above just commuting people.”