THE SOUTH African National Taxi Council (Santaco) has warned that fare increases may soon become "unavoidable" in response to the impending rise in Value Added Tax (VAT), included in the 2025 fiscal framework recently adopted by Parliament.

The framework, which passed with a narrow 194 to 182 vote, includes a controversial VAT hike that has faced criticism from civil society groups and various political parties, including some members of the Government of National Unity (GNU), who argue it will disproportionately impact low-income South Africans.

Despite the backlash, the African National Congress (ANC), the Inkatha Freedom Party (IFP), and several smaller parties have defended the VAT increase as a necessary measure to ensure fiscal stability and sustain public service delivery.

Ahead of the vote, Finance Minister Enoch Godongwana acknowledged mounting pressure on the national budget, particularly the state’s ability to fund essential services and pay frontline workers such as teachers and healthcare professionals.

Santaco spokesperson Mmatshikhidi Phala slammed the VAT increase, warning it would significantly raise operational costs for taxi owners and operators.

“To put it bluntly, this increase feels like rubbing salt into an already open wound. Many of our operators are already struggling with exceptionally high vehicle financing interest rates—ranging from 18% to 25%—resulting in steep monthly installments,” Phala said.

She added that the additional financial burden would further strain operators already grappling with rising maintenance costs, fuel, salaries, and loan repayments.

“This forces operators to juggle critical expenses and make difficult choices just to stay afloat. The VAT increase only compounds an already challenging environment.”

The minibus taxi industry plays a significant role in South Africa’s public transport system, transporting over 60% of daily commuters. It is estimated to generate approximately R50 billion annually. Unlike other modes of public transport such as buses and trains, the industry does not currently receive government subsidies.

Phala stressed that while fare hikes may become necessary, they are not a sustainable long-term solution.

“The majority of our commuters—over 11 million South Africans—are already struggling with the cost of living. They simply cannot absorb significant fare increases,” she said.

“This is why Santaco has long called for government subsidies and for financial institutions to adopt a less risk-averse approach to the sector.”

She confirmed that some associations are currently considering fare increases, likely capped at around 10%, guided by Santaco’s fare index and rising operational costs.

"Many associations, guided by our taxi fare index and other cost factors, are considering fare increases—though these are likely to be capped at no more than 10% of current fares.

"The timing and exact nature of any adjustments remain at the discretion of each individual association, as they best understand the dynamics of their specific routes and commuter bases. Any changes, once determined, will be communicated to commuters well in advance to allow for preparation and transparency," she said.