Business Maverick

Business Maverick

Santaco’s high flying dreams only start with an airline

Santaco’s high flying dreams only start with an airline

You laughed when the news of an airline owned by South Africa’s notorious taxi bosses hit the papers, didn’t you? Well, laugh no more. Because once you hear what else Santaco has up its sleeve, you’ll realise that they could very well have the last laugh. SIPHO HLONGWANE talked to Santaco’s Nkululeko Buthelezi about their big plans for an industry sometimes described as South Africa’s “economic backbone”.

It’s astonishing, actually. Here is an industry that is probably the most reviled in South Africa. It has suffered (or inflicted upon the country, depending on how you look at it) a never-ending series of strikes which often turn violent, seemingly on a whim. The average minibus taxi is notoriously unroadworthy. Whenever you hear about dozens of people dying all at once on our perilous roads, there’s inevitably a taxi involved.

So how do they plan to clean up the industry’s image? Perhaps a few lessons on the good, old K53 standard for drivers and a few more on manners? Not quite. The South African National Taxi Association is on a charm offensive in a big way by extending an arm into an industry that is fickle and hugely intolerant of nonsense: Civil aviation.

And once you look at a few industry statistics, it makes sense why Santaco can blithely ignore all the scorn heaped upon minibus taxis and comfortably decide to launch a low-cost airline. According to Arrive Alive, minibus taxis account for about 65% of all public transport in the country. There are about 150,000 of them out there, transporting 15 people at a time to and from destinations, and making dozens of such trips in a day. This all adds up to an estimated R16.5 billion in revenue every year. And Santaco is the biggest taxi association in the country and the only one recognised by the government. The clout of the minibus taxi industry and its representatives cannot be underestimated.

Santaco recently announced plans to launch a low-cost airline to fly, if all goes according to plan, between Lanseria in Gauteng and Bisho in Eastern Cape. The Daily Maverick sat down with Nkululeko Buthelezi, the business development officer of Santaco, to find out just what the taxi industry would look like it if decided to put away the All Star sneakers and don a tie.

Prior to working for Santaco, Buthelezi was the Group CEO of South African National Transport Solutions, a transport training agency that was also responsible for getting the various Gauteng taxi associations in on the 2010 Fifa World Cup “park and ride” systems. He explained that the idea of an airline is different from what we are accustomed to. “We want to call our model a door-to-door service,” he said. “You’ll leave your house and walk less than a kilometre, find a taxi and go to Park Station. When you get there, you decide that you don’t want to be on the road for 14 hours, or you’ve got a bit of extra cash – this service is not aimed at taking business away from taxi drivers, it will be at a premium – and want to go to Eastern Cape on the flight, so you go to a [different] section of Park Station and are immediately issued with a boarding pass, your bags are taken and then you go through a security check – all in the taxi rank.

“Once you step into the airline section you’ll notice you’re in a different environment, from the level of cleanliness to the quality of service you’ll get. The decor. Everything. From there, you’ll be taken to Lanseria and you’ll be received by the ground crew and (board) the plane. When you hit the ground on the other side, you and your bags will be taken on a shuttle and to the taxi rank there, which will be a major hub we want to develop.”

The Lanseria-to-Bisho route is what made the most sense to Santaco at the moment, Buthelezi said. There was already enough traffic going between the two provinces to justify setting up an airline. “We’ve already had approaches from other provinces saying ‘Can’t you fly into our province?’,” he said.

“It must make business sense. The airline business is very tight in terms of margins. Internationally, airlines are looking at about 66% load factor to break even. We need a minimum of 80% and if we have guarantees of numbers, then we’ll consider any route. We’re starting slowly; we don’t want to saturate ourselves. The airline industry burns cash so we don’t want to overextend ourselves,” said Buthelezi.

According to Santaco’s timeline, they plan to start flights in November.

Photo: Santaco’s Buthelezi.

“We are launching the airline in September. During the launch we’ll do a proper announcement in terms of when is what happening. We don’t have aircraft, a pilot and we don’t have a crew ourselves. We don’t have a licence. So we have to hire those,” he said.

“How the model is designed is that in the beginning we’ll hire all those things, but we’ll then work on a sliding scale so that we’ll take on some of those responsibilities over time. So we’re likely to have a dual management team with guys who are highly experienced and are also business people. Over time as we develop our team we will slowly take over some of the responsibilities. And again the model financially doesn’t make sense if we outsource everything – we want to do some of those things internally.

“From a funding point of view, the model is such that this is a black-owned business and we want to give people a chance to own a business within the aviation space, in particular our members. So the first phase will be to sell shares to our members, [the date of which] which will be announced in due course. The second phase will be when we get investors and already we have quite a number of approaches from private investors who want to put money in this business. In September we’ll be able to announce the strategic partners and what they are bringing on board. The third level of capitalising the business will be a listing on the Johannesburg Securities Exchange,” Buthelezi said.

Responding to questions about the scepticism in the press, Buthelezi responds, “I think the first thing one wants to ask the public to do is to separate the two [businesses]. Aviation and taxi operation are two different things. Once you start to think of the aviation [side] as a taxi operation, that’s what is causing the confusion with people who know what goes on in taxi ranks. Aviation in South Africa has a good record. It is well regulated; there are checks and controls so Santaco can’t run its service differently to someone like SAA. What I can say to people is that they must expect the same service, if not better, from Santaco. Same level of security and safety. There will be air-hostesses there and everything.”

To modernise itself, the association, that was welded together in 2001 from all the ragtag taxi associations in South Africa after an exasperated government asked taxi bosses to speak with one voice, has hired an entire team of professional businessmen to take care of, well, the business side of things. This airline business won’t be the first time taxi operators have  tried to branch into other forms of transport. It has never ended well before. This time though, Buthelezi is confident they will be ready.

He said, “Aviation is a risky business. It’s huge and complex. What we have done is (to) set up a strategy where we’ve restructured Santaco itself. We’ve got a management team in place, former bankers and financial planners who understand business who are coming into this environment. Personally, I’m a former company CEO, so I understand business. Structures are different; we are doing this differently, so this deal will go better than things in the past.”

Buthelezi said there was even talk of expanding flights to other SADC countries, as soon as the African Union could get countries to agree on freeing up the skies from stifling rules.

But wait, there’s more! Santaco plans to give the entire minibus taxi business a huge facelift. Ever been inside an airport terminal? That is what taxi ranks of the future will look like, if Santaco fulfils its dreams. “How did people come into Sandton this morning?” Buthelezi asked (our interview took place in a hotel in central Sandton). “They took taxis. So instead of us bringing people to malls and they don’t own a thing [in the mall], we are going to convert our taxi ranks into terminals with malls on top. So after work, before you get into the taxi you can quickly go upstairs and do your shopping. Because we know what business wants are people and we can bring the people. We want black people to have a chance to own a part of such businesses.”

And still, the big plans don’t end. Just like Santaco hopes that the facelift will inspire everybody in the industry to upgrade their levels of service, it wants to start a training academy to train drivers to provide a better service. (Is that thunderous clamour I hear the raucous cheering of every other South African road user?)

“One of the first projects of the academy is that we will train 100 women drivers from all the provinces. What will happen with these women drivers is that they will be on an exchange programme. When they complete their training, we will go to Association X and say, ‘Give us 100 drivers to train’ and then we’ll give them the women drivers. When their own drivers come back, we’ll move the women to another association and so forth. Eventually we want to expose all associations to these well-trained drivers so that other taxi drivers can say, ‘You know what? I also want to go through this academy’.
“A good example is our drivers that did Bus Rapid Transit [training] – they are different. They had a behaviour change overnight because the environment was different. It was what our [Santaco] president likes to say, ‘The taxi rank environment says ungachama noma ikuphi [you can pee anywhere], but if you get to an airport, you can see for yourself that you can’t just do it anywhere,” Buthelezi said.

The government has been puzzling for ages how it can bring the taxi industry into the formal economy, admittedly for the purposes of taxing it. Buthelezi makes it sound as if they are about to do it all by themselves, simply because the economics of it make sense.

South Africa’s economic backbone is about to get a lot sexier, even if it just manages to run a successful budget airline between Lanseria and Bisho. And if they really do turn their major taxi ranks into terminals? Well, the possibilities are endless, as they say. DM

Read more:

  • Taxi industry takes to the skies on News24;
  • Santaco airline will bring blacks into industry in Business Report.

Photo: A man washes a taxi in front of cooling towers in Bloemfontein November 19, 2009. REUTERS/Siphiwe Sibeko


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