Automated Fare Collection Systems

Adoption of an Automated Fare Collection System: City of Tshwane Taxi Owner's Perspectives

by

PETER MUWANULA

A dissertation submitted in fulfilment for the Degree

of

Magister Commercii

in

Business Management

Faculty of Management

UNIVERSITY OF JOHANNESBURG

Supervisor: Dr. M. Dos Santos

Co-Supervisor: Ms. E. Strydom

2013

DECLARATION I certify that the minor dissertation submitted by me for the degree Master’s of Commerce (Business Management) at the University of Johannesburg is my independent work and has not been submitted by me for a degree at another university.

PETER MUWANULA

Abstract

The smart card concept was first patented in 1970 by Dr. Kunitaka Arimura of Japan

and further developments of the smart card took place throughout the 1970s (History

of Smart Cards) and development still continues today. A Contactless Smart Card

(CSC) is a card the same size of a credit card which consists of a chip, a magstrip

and an antenna imbedded in the card. The purpose of the antenna is to

communicate with a contactless card reader eliminating the need to insert the card

into a Point of Sale (POS) terminal. The main purpose of the contactless feature is to

facilitate transactions below R200 as well as speed up these low value transactions

by eliminating the need to insert a Personal Identification Number (PIN). This allows

card holders to pay for goods or services quickly and it also enables retailers and

service providers to increase their throughput. The CSC can be used in both retail

and transit environments and in South Africa, the CSC is the latest development in

electronic fare media for transit operators and it also forms part of an Automated

Fare Collection System (AFC).

Smart card technology in South Africa for public transport use is still a new concept,

but is now visible with the Gautrain rail service in Gauteng, and the MyCiTi bus

service in the Western Cape. Applying an AFC system to the South African taxi

industry would be a step in the right direction towards formalising the taxi industry

and aligning it with that of more developed countries. This would mean that taxi

owners, drivers and commuters would have to migrate from what is a predominantly

cash based industry to using a CSC for fare media payments. Previous research on

this topic is limited and therefore, this research sought out to determine the views of

selected South African taxi owners regarding adopting an AFC system in the South

African taxi industry. The research objectives of the study were to determine the

levels of awareness and knowledge of an AFC system among selected South

African taxi owners, to determine the perceptions of the benefits, barriers and

industry challenges to adopting an AFC system of selected South African taxi

owners and to determine the views of selected South African taxi owners of the role

of the National Department of Transport (NDoT) in adopting an AFC system.

i

A qualitative research approach was adopted where data was collected by means of

in-depth interviews. The results of the research revealed that despite taxi owners

identifying operational benefits for incorporating the AFC system into their taxis, they

are currently not ready to adopt the solution. Taxi owners indicated that the cost to

use the CSC and the prompt migration from cash to card may be a bit too radical for

the majority of commuters. Most of their commuters are on the lower end of the

market and cash is what they are used to. Taxi owners also showed concern

towards the potential risk of sabotage of the AFC system by their drivers. With the

incorporation of the AFC system in to their taxis, taxi owners could not identify any

real benefit for the taxi driver. One of the identified operational benefits by the taxi

owners was that the AFC system would mitigate the theft of fare income by taxi

drivers. According to the taxi owners, this disadvantage for the taxi driver would drive

them to look for loopholes within the AFC system and exploit the loophole. This

action from the drivers could potentially leave the taxi owners in a worse off financial

position.

This research from a management perspective will give AFC system providers and

contactless card issuers an indication as to how compatible the existing solution is

for the South African taxi industry. As the solution stands now it may not be suitable

for the South African industry and modifications may need to be considered in order

to make the innovation successful.

ii

Acknowledgements The past three years have been the most challenging and exciting years in my

academic career. My decision to travel down this path has taught me a lot about

myself and has proved to myself that anything is possible through effort and

perseverance.

It gives me great pleasure and gratitude to acknowledge the following individuals that

have contributed to my success:

• To my two dedicated supervisors at the University of Johannesburg who I feel

went the extra mile to provide me with continuous feedback and guidance to

ensure that I complete the research on time. Dr. M. Dos Santos & Ms. E.

Strydom, I would just like to thank you from the bottom of my heart for the

countless hours you put aside to help me with my work. You are really good at

what you do and thank you for your contribution towards producing quality

students and unleashing them to take on the world with confidence.

• I would also like to mention Dr Corne Meintjes who went above and beyond in

assisting me in fine-tuning my research to this level of perfection that even has

me still surprised in what can be achieve when effort and persistence has been

applied.

• To my parents, Edward and Olivia Muwanula who gave me constant support and

my mom who called me almost every day to check up on my status and push me

to complete.

• To my sister Pheona Härtel and brother in law Dirk Härtel who always made their

home available to me when I just needed to work away from Johannesburg.

• To my wonderful girlfriend, Ntebogeng Mashilane, who without fail was always

there for me from the start until the end and always made me smile when I was

down.

• To the participants that participated in this research, thank you for your

contribution towards this research.

iii

TABLE OF CONTENTS

PAGE

Abstract i

Acknowledgements iii

CHAPTER ONE: ORIENTATION AND BACKGROUND

1.1. Introduction 1

1.1.1. The South African Taxi Industry 2

1.1.2. Characteristics of the South African Taxi Industry 3

1.2. Operating Environment and Challenges 4

1.3. New Technology Issues in AFC 5

1.3.1. Operational Advantages of the AFC 6

1.3.2. Infrastructure Costs 7

1.4. Adoption of New Technologies 8

1.4.1. Process and Model of the Innovation Decision Process 9

1.5. Problem Statement 12

1.6. Purpose of Study 13

1.7. Research Objectives 14

1.8. Conceptualisation and Metatheoretical Framework 14

1.8.1. Sociological Systems Theory as Grand Theory 15

1.8.2. Disciplines of Marketing and Business Management 15

1.8.3. Theories Related to the Study 16

1.9. Previous Studies 17

1.10. Research Design 18

1.10.1. Target Population 18

1.10.2. Sampling 18

1.10.3. Data Collection 19

1.10.4. Data Analysis 19

1.11. Delimitations and Assumptions 19

1.12. Importance of the Study 20

1.13. Research Ethics 21

iv

CHAPTER TWO: THEORETICAL FOUNDATION AND PRACTICAL ORIENTATION OF THE STUDY

PAGE

2.1. Introduction 23

2.2. Systems Theory 23

2.3. Marketing as a Discipline 25

2.4. Business Management as a Discipline 26

2.5. Innovation 26

2.5.1. Types of Innovation 27

2.5.2. Benefits of Innovation from Various Perspectives 27

2.5.3. Barriers to Innovation Adoption 29

2.5.4. Decision Process 32

2.5.5. Characteristics 34

2.6. Background of the South African Payment Environment Related to 36

Transportation

2.7. The South African Taxi Industry 37

2.8. Fare Media 39

2.8.1. Non-Electronic Fare Media Options 42

2.8.2. Electronic Fare Media Options 42

2.9. Conclusion 48

CHAPTER THREE: RESEARCH METHODOLOGY


3.2. Research Design 50

3.3. Problem Statement 51

3.4. Purpose of Study 52

3.5. Research Objectives 52

3.6. Sampling Design 53

3.7. Data Collection 54

3.7.1. Interview Schedule 56

v

7.2. Interview Procedure 58

3.8. Data Analysis 59

3.9. Pilot Study 62

3.10. Trustworthiness 63

3.11. Ethical Concerns 65

3.12. Conclusion 65

CHAPTER FOUR: RESULTS


4.2. South African Taxi Owners Interview Results 66

4.3. Biographical Information 67

4.4. Research Results of Research Objective 1 71



4.7. Conclusion 93

CHAPTER FIVE: CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction 94

5.2 Conclusion of Findings Related to Research Objectives 94

5.2.1. Research Objective 1: Taxi Owners Awareness and Knowledge 94

of an AFC System

5.2.2. Research Objective 2: Taxi Owners Perceptions of the Benefits, 95

Barriers and Challenges to Adopting an AFC System

5.2.3. Research Objective 3: Taxi Owners Views of the Role of the 98

NDoT in Adopting an AFC System

5.3 Recommendations 98

5.4 Limitations of Research 100

5.5 Recommendations for Future Research 100

5.6 Conclusion 101

vi

PAGE

Reference List 103

Appendix A: Interview Consent Form 111

Appendix B: Pictures Used with Interview Agenda 112

Appendix C: Research Agenda 114

Appendix D: National Land Transportation ACT, 2009: Regulations 118

Relating to Integrated Fare Systems.

vii

List of Tables

PAGE

Table 1.1: Costs Associated with AFC System 8

Table 1.2: Theoretical and Metatheoretical Framework 15

Table 1.3: Ethical Considerations 21

Table 1.4: Demarcation of Chapters 22

Table 2.1: Properties of the Systems Theory 23

Table 3.1: Advantages and Disadvantages of In-depth Interviews 55

Table 3.2: Aim of Interview Questions 56

Table 3.3: Code Categories 61

Table 3.4: Aspects of the Pilot Study Addressed 63

Table 4.1: Research Objectives and Associated Themes 67

Table 4.2: Biographical information 67

Table 4.3: The Understanding and Awareness of an AFC System among 72

SA Taxi Owners

Table 4.4: The Perceptions of SA Taxi Owners of the Benefits for them to 74

Adopting an AFC System

Table 4.5: The Perceptions of SA Taxi Owners of the Benefits for 75

Commuters to Adopting an AFC System

Table 4.6: The Perceptions of SA Taxi Owners of the Benefits for 77

Taxi Drivers to Adopting an AFC System

Table 4.7: The Perceptions of SA Taxi Owners of the Barriers for 78

them to Adopting an AFC System


Commuters to Adopting an AFC System

viii

PAGE


Taxi Drivers to adopting an AFC System

Table 4.10: Intended Decisions Regarding the AFC System 85

Table 4.11: The Views of Selected SA Taxi Owners of the Role of the 91

NDoT in adopting an AFC System

ix

List of Figurers

PAGE

Figure 1.1: Composition of a Contactless Smart Card 6

Figure 1.2: Model of the Innovation Decision Process 12

Figure 2.1: Transit Operator Fare Media Options/ Types of Fare Media 39

Figure 3.1: Creswell’s Data Analysis in Qualitative Research 60

Appendix B

Figure 1.1: Commuter Making Payment before Boarding Taxi 112

Figure 1.2: Commuter Presenting CSC to Contactless Reader 112

Figure 1.3: Smart Card Payment Process in Taxi Environment 113

Figure 1.4: Payment Transmission Process 113

x

List of Acronyms

AFC Automated Fare Collection

ATM Automated Teller Machine

BRT Bus Rapid Transit

CSC Contactless Smart Card

GDP Gross Domestic Product

I.T. Information Technology

LBRT Local Road Transportation Board

M.I Management Information

MS Magnetic Strip

MSF Merchant Service Fee

NDoT National Department of Transport

POS Point of Sale

PIN Personal Identification Number

PVC Polyvinyl Chloride

RF Radio Frequency

ROI Return on Investment

SIM Subscriber Identity Module

TTC Toronto Transit Commission

UK United Kingdom

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Adoption of an Automated Fare Collection System: City of Tshwane Taxi Owner's Perspectives

CHAPTER ONE

ORIENTATION AND BACKGROUND

1.1 Introduction

A public transport system is one of the most important building blocks of any

economy (Fourie, 2003:2). In every economy where there is some form of transport

network, people without their own means of transport are reliant on public transport

(Ferreia, 2010:1). In South Africa three main modes of transport exist which includes

trains, buses and taxis (Barrett, 2003:6). Taxis are not only the most accessible but

they are the most common mode of transport within the South African environment

with the basic objective of transporting commuters from one point to another

(Ferreia, 2010:1). The current cash based payment to taxi drivers by commuters

facilitates cash theft and money laundering by taxi drivers (Ndebele, 2011). Thus,

there is a need for an alternative means to collect taxi fares. The National

Department of Transport (NDoT) and the Minister of Transport with his amendments

to the land transport act on the 17th of June 2011 support the introduction of an

Automated Fare Collection (AFC) system. However, for an AFC system to be

introduced and adopted, taxi owners’ need to be aware and knowledgeable about

the innovation. Consequently, it has become necessary to explore the views of taxi

owners regarding an AFC system to gain an understanding of their levels of

awareness and knowledge as well as how they view the benefits and barriers to

adopting such a system.

This study will provide insight into the readiness of the South African taxi industry in

the adoption of an AFC system. The support provided by the NDoT for AFC systems

in the public transport environment and attempt to create an ecosystem for card

based payments, could be hampered or slowed down as a result of taxi owners and

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possibly stakeholders within the industry not being ready to adopt the AFC solution.

Understanding the reasons behind the readiness or non-readiness of the taxi

industry in the adoption of an AFC system could be of value to both the NDoT as

well as contactless card issuers.

This chapter provides an overview of the South African taxi industry, outlined a

theoretical orientation towards this research and offers an overview of the

methodology adopted. The following discussion will take a closer look at the South

African taxi industry.

1.1.1 The South African Taxi Industry

The taxi industry was closely tied to the history of apartheid (Barrett, 2003:6). Black

South African's had limited legal access to business opportunities and it was almost

impossible for an African person to obtain a permit to operate (Barrett, 2003:6). The

minority of black African's that managed to get a permit used regular sedan vehicles

and catered for a very small market leaving the rest of the market to be dominated

by the state-owned rail sector and the subsidised bus industry (Barrett, 2003:6).

From the early 1960's black African's were relocated to townships which were part of

the apartheid policy to keep racially defined groups separate from each other

(Barrett, 2003:6). This relocation into townships meant that the commuters that

would usually take the train or bus to work were far away from their stations or bus

stops. Transport costs also escalated and train and bus services only operated

during peak times which were an inconvenience for commuters.

Although there was a loophole identified by taxi operators in the Road Transportation

Act of 1977 which allowed them to apply for a permit, obtaining a permit still proved

to be difficult and taxi operators continued to operate illegally (Barrett, 2003:6).

Between the early 1980's to 1995 the taxi industry grew at a phenomenal rate to

address the issue of limited transport options (Fourie, 2003:2-3).

According to Fourie (2003:2-3) the industry grew from a small informal operation to a

leading transport mode of choice in the public transport industry which accounted for

2

approximately 65% of passenger journeys. According to Fobosi (2013:1), to date, the

South African taxi industry is still an important pillar of the country’s public transport

system. It still remains the most available and an affordable mode of transport for the

public. Fourie (2003:2-3) suggests that the taxi industry provides transport for 5 to 10

million people every day and has a daily turnover of R15 million. This indicates the

magnitude of this industry and thus the need to consider and address areas where

the operational environment of this industry and section of South Africa’s public

transport system may be improved.

1.1.2 Characteristics of the South African Taxi Industry

In a speech held on the 25th October 2011 by Ndebele (2011) the Minister of

Transport for South Africa mentioned a few statistics about the taxi industry:

• the taxi industry is made up of minibuses and metered taxis. Minibus taxis

dominate the market by 90%;

• there are approximately 283 159 public taxis;

• of the available modes of public transport in South Africa, taxis account for 65%

of the mode used by commuters, buses 20% and 15% rail;

• it is estimated that the taxi industry contributes around R30 billion towards the

Gross Domestic Product (GDP) of South Africa;

• the taxi industry is made up of more than 125 000 owners and it creates an

estimated 600 000 jobs, which includes:

o 100 000 Car Washers: Individuals that wash the taxis;

o 80 000 Rank Marshals: Assist commuters by directing them to the

correct taxi;

o 100 000 Conductors: They assist drivers in the collection of fares;

and

o 283 159 Drivers: Drivers of taxi vehicles.

These statistics highlight the size of the taxi industry in South Africa, the importance

of the industry for commuters as well as the number of jobs it provides for individuals

that are willing to work for an income.

3

It was not until the mid-1980's when taxi drivers were no longer taxi owners. Taxi

owners were previously also drivers because of the limited number of vehicles

available. However, owners now employ taxi drivers whose income depends on how

many trips the driver makes (Khosa, 1994:62). Khosa (1994:62) suggests that the

taxi drivers’ conditions of employment are not favourable, taxi drivers are labourers

and not entrepreneurs, are not paid well and will probably never have the opportunity

to save enough to purchase their own taxi.

As taxi operators become more successful in their business, they continue to secure

fleets of taxis to the extent that they become managers employing not only drivers

but also cleaners, mechanics, taxi marshals and accountants (Khosa, 1994:63).

Although taxi drivers have employment, they are forced to work long hours which

can typically be between 16 and 18 hours with set daily financial targets that the

driver must achieve or risk losing their job (Khosa, 1994:63). Taxi drivers are not the

only ones facing challenges. The taxi industry itself also faces challenges such as its

operating environment. However, limited information and research are available

outlining these challenges and thus forms the starting point of this study.

1.2 Operating Environment and Challenges

According to Ndebele (2011) the current taxi industry's operating environment still

has a number of challenges including (1) it is an industry that has been de-regulated

for nearly two decades, but any form of regulation is viewed with suspicion; (2) profit

margins are low coupled with set daily revenue targets which forces taxi drivers to

drive aggressively to make as many trips as possible; (3) it is an industry where

working conditions and training requirements have not been given priority; (4) it is a

cash based industry which creates an opportunity for cash theft and fertile ground for

money laundering activities and (5) loss of revenue to government by way of tax.

According to Walters (2007:1) in developing countries such as South Africa, certain

features are absent from its public transport services as compared to those of first

world countries, such as making use of an Automated Fare Collection (AFC) system.

Not all strategies that have been set by the National Department of Transport

(NDoT) have been or can be achieved. Should the South African taxi industry

4

introduce an AFC system, some of the challenges outlined may be addressed.

Therefore, this research aims to determine the views of selected South African taxi

owners regarding adopting an Automated Fare Collection (AFC) system in the South

African taxi industry in order to gain a better understanding of whether the

introduction of an AFC system may be possible. However, a clear understanding of

AFC technology is necessary and thus discussed next.

1.3 New Technology Issues in AFC

An AFC system is a key interface between a transit operator and its commuters

(Toronto Transit Commission (TTC) Fare Collection Study, 2000:3). The key

objectives of an AFC system is to provide an economical way for transit operators to

collect fares while minimizing losses in the fare collection process and to also

provide commuters with a safe and practical way for paying for their trips to their

various destinations (TTC Fare Collection Study, 2000:3-4).

The Contactless Smart Card (CSC) is the tool that will be used to complete the AFC

system by making it possible for funds to be subtracted from the card by presenting

the card within close proximity to the contactless card terminal. This card looks just

like a normal chip enabled credit card. The card is primarily used for contactless

transactions but it can also perform contact transactions where there is no

contactless card reader present (Cornelius, 2012a).

The only added difference between the CSC and a credit card is that in between the

two plastics that holds the card together is an antenna that allows the card to

communicate with a wireless card receiver. This gives the card the ability to perform

contactless transactions. The basic idea is to eliminate or rather reduce the need to

hold cash by the user of the card and the merchant. The composition of a CSC is

displayed in Figure 1.1

5

Figure 1.1: Composition of a Contactless Smart Card

Source: Calypso Networks Association (2011)

CSC as a means of payment for transportation is starting to slowly surface in South

Africa with the example of the Gautrain rail service between the City of Tshwane and

Johannesburg and the MyCiTi buses in the City of Cape Town. A CSC card is used

to facilitate payment for trips. Contactless transactions do not require for the terminal

to go online and communicate with the bank to approve transactions. Transactions

occur offline and are stored in the terminal. The terminal communicates with the card

to determine if there are funds available on the card and then approves or declines

transactions based on the response received from the smart card (Kruger, 2012).

At the end of the day the transit operator can either place the terminal into a docking

station and the transaction information is sent to the bank, or they can have a

Subscriber Identity Module (SIM) card inserted into the terminal which would send

the transaction information via 3G to the bank (Kruger, 2012). This quick offline

interaction makes transactions occur almost instantly. It makes this form of payment

perfect for transit payments because of the faster throughput and various operational

advantages that can be achieved (Cornelius, 2012a).

1.3.1 Operational Advantages of the AFC

According to the TTC Fare Collection Study (2000:28) the following operational

advantages have been identified with the use of AFC systems coupled with the CSC

card:

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• reduces the level of fraud because CSC is more difficult to counterfeit than paper

based ticketing systems;

• reduces the amount of both internal and external theft because AFC allows

improved financial control;

• improved fare equipment reliability because minimal or no physical contact or

interaction is required on the AFC devices. This reduces maintenance costs;

• improved management information which can assist in more focused planning;

• faster throughput because no more counting of change.

From these identified operational advantages it is possible to tackle current

challenges in the South African taxi industry such as reducing money laundering

opportunities and better revenue collection for taxi owners. Also the fact that there is

no more money in the system and commuters only have to tap their card, this could

lead to a better customer experience and a safer environment for both commuters

and taxi drivers. As with all new systems that are put in place, there are some costs

that may apply.

1.3.2 Infrastructure Costs

Cornelius (2012b), product owner and manager of Contactless Smart Cards at a

leading Bank suggests that creating an integrated environment for AFC requires

much work and a fully integrated transport network is also expected to take years to

really be visible and appreciated. He is of the opinion that in creating an integrated

AFC environment there has to be a starting point.

The mission of the NDoT in creating a fully integrated system (Delca Systems,

2005:9) has begun in Cape Town with the official launch of the myconnect CSC card

for the MyCiTi Bus Rapid Transit (BRT) Buses on the 10th December 2011 (MyCiTi,

2012). The myconnect card has replaced the paper based ticketing system that was

previously used with the MyCiTi public bus service and this CSC is an open loop

card by card association meaning that it can be used anywhere where the card

association branding can be found .i.e: MasterCard or Visa. The plan is to role this

technology out by starting off with buses, then taxi and rail. By doing this, an

7

integrated public transport network will be created, allowing commuters to use one

CSC for all modes of transport. Like all other new developments there will be some

costs that taxi operators as well as commuters will be subjected to which have been

tabulated in Table 1.1.

Table 1.1: Costs Associated with AFC System Fees Applicable to Taxi Operators

1. Terminal Rental Fees a Monthly rental fee per terminal (standalone terminals provided by

Bank) R250.00 (excl. VAT)

b Call out / support fees R250.00 (excl. VAT) per hour

c Communication service provider fees – ConnectNet R20.00 excl. VAT per site

2. Merchant Service Fees a Merchant Service Fee (MSF) – Taxi operator co-branded LVP

prepaid cards 0.68% excl VAT (no annual CPI increase is applicable)

b Merchant Service Fee (MSF) – Debit Cards with LVP functionality (if introduced)

1.3% excl VAT (no annual CPI increase is applicable)

c Merchant Service Fee (MSF) – Credit Cards with LVP functionality (if introduced)

1.85% excl VAT (no annual CPI increase is applicable)

Fees Applicable to Commuters 3. Card Fee a Card fee R25.80 (excl. VAT) Value Loads b Load fee for load of value onto contactless card 2.5% of load value or

minimum of R1.50 (excl. VAT). Whichever is higher

Source: Cornelius (2012b)

Bosworth (2013) suggests that South African commuters are price sensitive and tend

to favour cheaper costs. The fees listed above could potentially be one of the

barriers for taxi owners adopting AFC and integrating it into their current operations.

1.4 Adoption of New Technologies

Introducing AFC as described by the TCC fare collection study (2000:28) will allow

the users to achieve certain operational advantages which would suggest that taxi

owners would automatically adopt AFC into their taxis to benefit from these

8

operational advantages. According to Rogers (1962:7) technologists think that

innovations that will provide benefit to the users or businesses will be adopted

rapidly but in fact this adoption process occurs at a slow rate. This occurs because

businesses do not have all the information about the innovation. The innovation is

also new, which will develop a degree of uncertainty among businesses (Rogers,

1962:6).

To reduce this degree of uncertainty, complete information about the innovation will

have to be conveyed to the business. This has been identified as one of the main

means of reducing uncertainty (Rogers, 1962:6). For the taxi drivers to acquire as

much information about AFC and finally decide if it would be advantageous, they

would have to go through the innovation decision process.

1.4.1 Process and Model of the Innovation Decision Process

According to Rogers (1962:163) the decision process is a series of steps where the

individual or business first hears of the innovation, they then form their attitudes

towards the innovation, which could be positive or negative. At this stage the

individual/business may decide to adopt or reject innovation. According to Fülöp

(2005:1) making a decision is an indication that there are alternative choices that

need to also be considered. This process not only allows the business to address the

issue of lack of information, it also allows them to evaluate the innovation to see if it

can be incorporated into current on-going operations (Rogers, 1962:163). The last

two steps are the implementation of the innovation and final confirmation of the

decision.

In order for a business to decide on adoption or rejection of the innovation, they will

have to go through five stages (Rogers, 1962:164) being knowledge, persuasion,

decision, implementation and confirmation. These are briefly discussed.

Knowledge

This is when the business is made aware of the innovation and how it functions. In

this initial stage the business learns of the innovation and seeks further information

about the innovation. According to Sahin (2006:16), it is during this phase that the

9

organisation attempts to unpack further detail regarding why the innovation exists,

how it works and how it could potentially benefit the organisation.

Persuasion

The persuasion stage is characterised by the business forming an attitude towards

the innovation. This attitude can be positive or even negative due to barriers and

benefits that the business has identified. According to Wertheimer and Santella

(2004:3) innovation throughout human history has been the driver of progress. It has

enhanced and created new industries and fuelled economies. Innovation has also

provided individuals and businesses with many advantages and new opportunities.

The advantages of AFC as described earlier could play an important role in

persuading taxi owners to take up the AFC system and apply it to their taxi

environment.

From a business perspective, applying innovative solutions to one’s business can

give the business the competitive edge that it needs to remain efficient in its

operations as well as stay ahead of its competitors. In terms of competitive

advantage there could be a number of things that a business does better or more

efficient than its competitors (Hammer, 2006). This could be the utilisation of less

people to do the same work as a similar business. The business with fewer

individuals will be saving operating expenses putting the business in a better

financial position than another.

In the rail transport industry for example, the application of AFC in the Gautrain

system has allowed this transit operator to process commuters much faster than the

Metrorail system giving it the reputation of a fast service from getting onto the train

as well as the train ride. This quick service has therefore been one of the factors that

have attracted business individuals to the Gautrain service. Although there are

various benefits to applying innovative solutions to a business, the barriers in some

cases could outweigh the benefits. In a report compiled by IBM Global Business

Services (2006:1-5) five barriers to the adoption of innovations by businesses were

identified including (1) inadequate funding: Obtaining the funds to peruse the

innovation; (2) risk avoidance: The various risks associated with the innovation that

the business may not be willing to take on; (3) siloing: Businesses tend to have one

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mission statement, one vision and one strategy. However businesses with

departments or divisions sometimes tend to compete with each other and may

individually fight for the innovation or resist it; (4) time commitments: How much time

that will be required to implement the innovation and its impact on normal operations

and (5) incorrect measures: The correctness in calculating the return on investment

(ROI) of the innovation which if incorrectly assessed could lead to the business

adopting the innovation for the wrong reason. This could lead to the failure of the

innovation in terms of the outcome the business was seeking.

Decision

This is when the business engages in activities that lead to a choice to adopt or

reject the innovation. Part of this process is the defining of the requirements of the

system and determining if these requirements meet the requirements of the business

(Fülöp, 2005:1). Sahin (2006:16) suggests that if an innovation is put through a trial

by the business a decision can be made quicker. The accelerated decision making

occurs because the innovation has been applied to the business own situation and if

it works well the business will come to an adoption decision, if the trial was

unsuccessful the innovation will be rejected until such a time that it can address the

requirements of the business.

Implementation

This is when the business puts the innovation to use. According to Sahin (2006:17),

during implementation there is still a degree of uncertainty about the outcome of full

implementation and therefor the business may still require technical assistance and

support to reduce the degree of uncertainty.

Confirmation

This is when the business seeks some form of reinforcement of the decision made.

An evaluation of the alternatives is usually done to compare the outcomes of various

options (Fülöp, 2005:2). The initial decision can be changed if the business is not

satisfied with the results.

Frambach and Schillewaert (1999:4) describe these stages in a similar manner but

suggest that the adoption decision occurs between two phases. The initiation and

11

implementation phase. According to Frambach and Schillewaert (1999:4) in the

initiation phase the business becomes or is made aware of the innovation, forms a

positive or negative attitude towards the innovation and evaluates the innovation

(product or Idea). In the second phase, the business makes the decision to adopt or

reject the innovation (Frambach & Schillewaert, 1999:4). The innovation decision

process can only be considered a success if the innovation is accepted and

integrated into the business (Frambach & Schillewaert, 1999:5). A model depicting

the Innovation Decision Process is provided in Figure 1.2.

Figure 1.2: Model of the Innovation Decision Process

Source: Rogers (1962:165)

The model that Rogers (1962:165) has defined above will form the basis of the

research to ascertain if taxi owners will adopt AFC systems into their current

practices. This model is important for this study because it is likely that the taxi

owners interviewed in this research will follow the innovation decision process as

described by Rogers in deciding whether they would consider adopting the AFC

technology or rejecting the technology.

1.5 Problem Statement

From a taxi owner's perspective, the current cash based payment to taxi drivers by

commuters facilitates cash theft and money laundering by taxi drivers. Ndebele

(2011) highlighted the points of opportunity for cash theft and money laundering

1. Adoption

2. Rejection

Continued Adoption

Continued Rejection

Later Adoption

Discontinuance

KNOWLEDGE PERSUASION DECISION IMPLEMENTATION CONFIRMATION

12

activities as some of the challenges of the taxi industry. The introduction of an AFC

system may address the issues associated with a cash based payment system. The

NDoT and the Minister of Transport with his amendments to the land transport act on

the 17th of June 2011 support the introduction of the new AFC system. However, for

an AFC system to be introduced and adopted, taxi owners’ need to be aware and

knowledgeable about the innovation. Consequently, it has become necessary to

explore the views of taxi owners regarding an AFC system to gain an understanding

of their levels of awareness and knowledge as well as how they view the benefits

and barriers to adopting such a system. The problem statement translates into the

general research question being investigated:

What are the views of selected South African taxi owners regarding adopting an

Automated Fare Collection (AFC) system in the South African taxi industry?

A number of research questions arise as a result of the general research question:

• What are selected South African taxi owners’ levels of awareness and

knowledge of an AFC system?

• What are selected South African taxi owners perceptions of the benefits,

barriers and industry challenges to adopting an AFC system?

• How do selected South African taxi owners see the role of the NDoT in

adopting an AFC system?

1.6 Purpose of Study

South Africa has two types of payment methods for its public rail network. Ticket

based payments which Metrorail uses and AFC which the Gautrain rail system uses.

The ticket based system used by Metrorail creates an environment that is not

commuter friendly. Long queues are formed at kiosks to get tickets before boarding

the train. There is possible loss of revenue through theft of money and counterfeit

tickets (TTC Study, 2000:28). The newer Gautrain rail service makes use of an AFC

system with automated card load self-service terminals. This is where commuters

feed cash or swipe their bank cards on a device that looks like an Automated Teller

Machine (ATM) to refund their cards. The commuter then taps their cards to make

13

payments through a series of gates to enter onto the train. The commuter also uses

the same card and taps it on a contactless terminal in a bus to make payment for a

bus ride. The use of this technology by the Gautrain transit operators has resulted in

the operational benefits identified by the TTC Study (2000:28). The introduction of

new technologies can be seen as a progression from what is current, replacing and

closing up loop holes of old systems or processes. According to Snow (2004:2-3)

new technologies replace and force old technologies out of inefficient applications

and are usually efficiency-enhancing. Thus, the introduction and adoption of an AFC

system in the South African taxi industry may address some of the problems and

challenges this industry is facing. However, in order for such a system to be

introduced and adopted by all the relevant parties in the industry, taxi owners need

to be aware of and have knowledge of both the benefits and barriers associated with

such a system. For this reason, this research focuses on exploring the views of

selected South African taxi owners regarding adopting an Automated Fare Collection

(AFC) system in the South African taxi industry.

1.7 Research Objectives

The study is guided by the following specific research objectives as they emanated

from the problem statement and research questions discussed in the previous

sections:

Ro1: To determine the levels of awareness and knowledge of an AFC system

among selected South African taxi owners.

Ro2: To determine the perceptions of the benefits, barriers and industry challenges

to adopting an AFC system of selected South African taxi owners.

Ro3: To determine the views of selected South African taxi owners of the role of the

NDoT in adopting an AFC system.

1.8 Conceptualisation and Metatheoretical Framework

The theoretical and metatheoretical conceptualisation of the study is presented in

Table 1.2.

14

Table 1.2: Theoretical and Metatheoretical Conceptualisation Grand theory Sociological systems theory Field/discipline Marketing Business Management Theories Diffusion of innovation, systems theory, resilience theory Concepts Innovation

Con

stru

cts/

dim

ensi

ons

Benefits Barriers Decision Process

Characteristics

Higher profits Inadequate funding

Knowledge Complexity

Reduced costs Risk avoidance

Persuasion Compatibility

Process improvements

Siloing Decision stage Relative Advantage

Customer satisfaction

Time commitments

Implementation stages

Trialability

Incorrect measures

Confirmation stage

Observability

1.8.1 Sociological Systems Theory as Grand Theory

The systems theory proposes that mechanical, organic and social systems can be

defined by their interactions with their environment (Buckley (1967:129). Systems

theory from a sociological perspective looks for the application of the systems

concept to the widest perspective such as human groups, societies and humanity as

a whole (von Bertalanffy, 1973: 194). Sociology is essentially the study of human

groups or systems from small groups to working groups both informal and formal.

Sociological theory attempts to define the sociocultural systems in terms of

functionalism considering the social phenomena with respect to the whole they serve

(von Bertalanffy, 1973: 195-196). Human groups, such as the South Africa taxi

owners, are not only an outcome of the social forces in the industry and South Africa,

but may be regarded as subhuman organisms where they are part of a “man-created

universe called culture” (von Bertalanffy, 1973:197).

1.8.2 Disciplines of Marketing and Business Management

Marketing is a discipline that enables produces of goods and services to interpret

that a customer wants and to satisfy those wants (Chartered Institute of Marketing,

2009). The Chartered Institute of Marketing (2009) suggests that marketing is a

management process that involves identifying, anticipating and satisfying customer

requirements profitably.

15

According to Hissom (2009:4), management is a process that includes setting

objectives, managing resources, strategic planning and deploying the financial and

human assets required to achieve the set objectives. Business management also

has four key functions which include planning, organising, leading and control.

These make up the functions that need to be performed to ensure a business

functions smoothly (Hissom, 2009:4).

In more developed countries, the transit operator as a customer needed a solution to

remedy some of the challenges they were facing. The concept of AFC systems was

developed to remedy specific challenges experienced in the transit industry and this

technology has been adopted. The adoption of these technologies in more

developed countries than that of South Africa was possibly as a result of the transit

operators applying the key functions of business management in order to achieve

the goal of being more efficient in their operations. The taxi industry in South Africa

is currently experiencing challenges as mentioned by Ndebele (2011) and taxi

owners may also have their individual problems that need to be addressed. If the taxi

owners want to address their business challenges they will have to practice the key

business management functions which should lead to the adoption of the AFC

solution mainly because of the operational advantages that can be gained. The taxi

owners may however need to assess this innovation and decide whether the industry

is ready to adopt the AFC solution.

1.8.3 Theories Related to the Study

Diffusion of innovation

According to Sahin (2006:14), the steps involved in adopting innovations have been

studied for over 30 years. The innovation decision process consists of a series of

steps where the individual first hears of the innovation, forms an attitude towards the

innovation, decides to adopt or reject the innovation and then confirms if they are

satisfied with the decision (Rogers,1962:163). Sahin (2006:14) suggests that Rogers

diffusion of innovations theory is an appropriate method for investigating the

adoption of technology.

16

Resilience theory

The resilience theory points out that there is a strong link between ecological and

social systems which are dependent on change in order to survive (Atwell, Schulte,

Westphal. 2008). Carlson, Bassett, Buehring, Collins, Folga, Haffenden, Petit,

Phillips, Verner and Whitefield (2012:12) define resilience as “a process linking a set

of adaptive capacities to a positive trajectory of functioning and adaptation after a

disturbance”. Adaptation is therefore an important component of remaining resilient.

Although there may be profit in the South African taxi industry for taxi owners the

attractiveness of this industry could be diminishing due the potentially high levels of

revenue loss through theft from taxi drivers. In order to fight the theft taxi owners

need to adapt and apply solutions to protect their money and maintain resilience.

Systems theory

A system, as defined by Skyttner (1996:16), is “a set of interacting units or elements

that form an integrated whole intended to perform some function”. Ackoff (1981:15)

defines a system as a set of two or more elements that satisfy the condition of the

behaviour of each element that has an effect on the behaviour of the whole. The

behaviour of the elements and their effects on the whole are interdependent and

therefore subgroups of the elements are formed. There are a number of properties

associated with the systems theory. These include interrelationship and

interdependence, holism, goal seeking, transformation process, inputs and outputs,

entropy, regulation, hierarchy, differentiation, equifinality and multifinality. These are

discussed in Chapter 2.

1.9 Previous Studies No other studies of this nature was found. There have however been

implementations of Bus Rapid Transit (BRT) systems and Rail systems that make

use of AFC systems such as (1) My City Bus Service in Cape Town, (2) Rea Vaya

Bus service in Johannesburg and (3) the Gautrain rail service. No research specific

to taxies utilizing AFC systems could be found.

17

1.10 Research Design

According to Babbie and Mouton (2001:270) qualitative research is the study of

human action from the perspective of the social actors themselves. This form of

research also requires specific methods and techniques which form a

methodological approach to obtaining data (Babbie & Mouton, 2001:270). Wimmer

and Dominick (2003:111) suggest that qualitative research makes use of a flexible

questioning approach and although a basic set of questions are included in an

interview schedule, the questions can be changed at any time.

Quantitative research on the other hand is a research method where data is

collected data in the form of numbers, then measures and analyses the numbers to

arrive at a conclusion (Babbie & Mouton, 2001:270). Unlike qualitative research

where the questions are flexible, quantitative research makes use of static or

standardised questions (Wimmer & Dominick, 2003:111). For this research, a

qualitative approach was used to obtain the research data.

1.10.1 Target Population

The target population for this research was all taxi owners operating in the Tshwane

metropolitan area. Babbie and Mouton (2001:173) define a study population as the

element that is being studied. To further clarify the study element the respondent's

demographics were described. The target population consisted of 20 taxi owners

that resided in the City of Tshwane and had two or more taxis. The study focused on

taxi owners with two or more taxis because with the increased amount of taxis to

manage, taxi owners were expected to face more operational challenges than what

they would if they only had one taxi to manage.

1.10.2 Sampling

According to Skosana (2010:47) sampling involves the use of any acceptable

method or procedure using a small number of a total population to make conclusions

regarding the total population. Babbie and Mouton (2001:270) suggest that there are

two types of sampling methods being non-probability sampling and probability

18

sampling. For this research, non-probability sampling was used and the sampling

technique that was used was snowball sampling. According to Babbie and Mouton

(2001:167) snowball sampling is a form of accidental sampling. This form of non-

probability sampling can be initiated by collecting data on the few available

individuals of the target population and then asking those individuals for information

other individuals that fall within the target population needed to be located. Babbie

and Mouton (2001:167) suggest that snowball sampling is the most appropriate

method to use when the target population is difficult to locate.

1.10.3 Data Collection

Data was collected from 20 respondents by setting up scheduled face-to-face in-

depth interviews with the sample population and recorded as many interviews that

were given consent to. According to Burns and Bush (2010:249) in-depth interviews

are a set of questions asked on a one-on-one basis to a participant by an interviewer

to gain more information from the respondent. The interview itself was semi-

structured and an interview schedule was used. Where a participant did not provide

enough information the participant was probed in order to extract more information.

1.10.4 Data Analysis

According to Levine (1997:1) data analysis can be seen as a body of methods that

can assist in the detection of patterns, describing facts and assist with the

development of explanations in the research process. The collected data was first

inductively coded and coded data was placed in categories and then sub-categories.

Axial coding was then done to determine the relationships between the categories

and sub-categories. For this research, Creswell's (2009:185) method for data

analysis was used which consists of six steps for data analysis.

1.11 Delimitations and Assumptions

This research adopted the systems theory as theoretical base. It is acknowledged

that stakeholder theory may provide additional insights into this research. However,

for the purpose of this study, this fell outside its scope. Although this research has its

19

focus on the concept of innovation, its particular focus lies with the decision-making

process, particularly the knowledge phase. Attention was given to the other phases

with less emphasis.

It is assumed the taxi owners participating in this research are currently experiencing

challenges within the industry and are seeking ways to reduce the challenges that

they are experiencing. Due to the publicity created around the Gautrain system,

which was the first high speed rail service that made use of an AFC system in South

Africa, it was assumed that all taxi owners would have heard of this AFC

implementation.

Furthermore it was also assumed that the taxi owners were aware of the NDoT’s

visions for the public transport industry because it was assumed that the NDoT had

great influence over the taxi industry.

1.12 Importance of the Study

Understanding the levels of awareness and knowledge of an AFC system among

selected South African taxi owners as, without being aware or having any knowledge

of the benefits and challenges of such a system could hinder the successful adoption

of this innovation. If taxi owners have a fair grasp of an AFC system and how they

could apply it in the South African taxi industry, the taxi owners, as one of the

stakeholders of the implementation of such a system, could drive this process.

In the case of this research taxi owners have not had an opportunity to test the

innovation in their current operations. This research attempts to understand the

perceived benefits and barriers that the taxi owners think of the innovation. This will

however give an indication to interested parties of the readiness of taxi owners for

the adoption of the innovation. If barriers are identified solutions can be formulated to

remedy the barriers to the adoption of AFC in the taxi industry.

The South African government plays an important role in the public transport sector

with strong campaigns to try to motivate South Africans to make use of public

transport and also to also elevate the public transport sector in South Africa to that of

20

a level that is comparable to first world countries. On the 17th of June 2011 changes

were made to the National Land Transport Act of 2009 to support and stimulate the

adoption of AFC. Understanding if taxi owners understand what the Minister of

Transport is doing to support AFC is important as this could be one of the factors

that could lead to the adoption of AFC if taxi owners understand and believe in the

work that the NDoT is doing.

1.13 Research Ethics

Ethics is typically associated with morality and deals with matters of right and wrong.

Therefore, anyone involved in research should be aware of the general agreements

shared by researchers about what is accepted practice in this area. The areas that

were explored were voluntary participation, no harm to the participants, anonymity

and confidentiality as well as analysis and reporting (Babbie & Mouton, 2001:470).

Table 1.3 indicates these aspects as they relate to this study.

Table 1.3: Ethical Considerations

ASPECT CONSIDERATION

VOLUNTARY PARTICIPATION

The wishes of participants were respected that did not want to participate in the research. Prior to conducting interviews with the participants, it was ensured that all participants signed a consent form.

NO HARM TO PARTICIPANTS

It was ensured that no harm in any form was inflicted onto the participants. It was also ensured that all participants involved in the research were comfortable to participate.

ANONYMITY Although contact was made and the participants were interviewed, it was ensured that special care was taken to ensure that the participants could not be linked to the responses that were given.

CONFIDENTIALITY Great care was taken in ensuring that all information that was provided by the participants remained confidential.

ANALYSIS AND REPORTING

The findings of the research were reported on without bias. The contact detail of the researcher was also made available to the respondents should they which to see the results of the research.

Source: Babbie & Mouton (2001:470-475)

21

Table 1.4: Demarcation of Chapters CHAPTER NAME DESCRIPTION

CHAPTER 2 Theoretical foundation and practical orientation of the study

Innovation can be considered to be one of the key drivers for business success. From a fare media perspective, the incremental innovations of fare media types to address the operational challenges within the transport industry have led to the AFC system being developed which addresses most of the challenges of previous fare media types. There are however various aspects of innovation that taxi owners have to consider, which includes the characteristics of early adopters, the innovation decision making process as well as the characteristics of the innovation. The purpose of this chapter was to further elaborate on the taxi industry in South Africa, fare media types and the possible barriers and benefits to innovation adoption that taxi owners could be faced with.

CHAPTER 3 Research Methodology This chapter solely focused on describing the research methods and design that were used to obtain data from the taxi owners that were interviewed in the City of Tshwane. For this research a qualitative research approach was adopted where non-probability sampling was used and face-to-face in- depth interviews were conducted.

CHAPTER 4 Results This chapter focused on analysing, reporting and finally interpreting the collected data on the opinions and views that taxi owners had about the AFC and its application in the taxi environment. What was discovered was that the majority of taxi owners were aware of an AFC solution and they were able to identify their perceived benefits and barriers to adopting the innovation. The NDoT had no influence in the taxi owners making their decision to adopt the innovation and what was considered to be the biggest barrier in their decision to adopt the AFC system was the taxi driver.

CHAPTER 5 Conclusion and Recommendations

This chapter covered the conclusions and recommendations which were based on the findings from the data analysis. What was found was the taxi industry is made up of a number of stakeholders which includes the taxi owner, the drivers, the commuters and the government. The AFC solution would have addressed some of the operational challenges that the taxi owners were experiencing but at the same time it would have exposed them to tax which they were not willing to pay as they feel the NDoT does not give their industry enough support. From a systems theory perspective in order for the AFC system to function correctly all stakeholders in the taxi industry need to be comfortable with the solution. As a recommendation to encourage adoption of the AFC solution a two-step geographically phased approach were recommended that would slowly introduce the AFC solution to the various stakeholders within the taxi industry which could possibly lead to the acceptance and eventually adoption of the AFC solution.

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CHAPTER TWO

THEORETICAL FOUNDATION AND PRACTICAL ORIENTATION OF THE STUDY

2.1 Introduction

Chapter 1 of this study provided a general orientation and overview of the current

research. The theoretical and metatheoretical conceptualisation of the study was

outlined and briefly mentioned. Chapter 2 furnishes more detail regarding the

different aspects of the conceptualisation of the study. Furthermore, it provides a

more detailed look into the South African payment environment, the media used and

the South African taxi industry.

2.2 Systems Theory

According to Langlois (1982:582) the systems theory is focused on the arrangement

and relations between the parts which connect them to a whole. These parts are

interdependent on each other and without each other they cannot make up the

whole. In the context of the South African taxi environment, the taxi industry is a

system made up of key stakeholders who are interdependent on each other and are

not able to function without the other. The taxi industry is made up of taxi owners,

taxi drivers, commuters, the public and the government. The properties of the

systems theory in relation to the study are discussed in Table 2.1.

Table 2.1: Properties of the Systems Theory PROPERTY OF SYSTEMS THEORY

DESCRIPTION OF PROPERTY RELATIONASHIP TO THIS STUDY

INTERRELAIHIP AND INTERDEPENDENCE OF OBJECTS AND THEIR ATTRUTES

Unrelated and independent elements can never constitute a system

The taxi industry is made up of taxi associations and stakeholders who include commuters, taxi owners, taxi drivers and the South African government. The stakeholders are the interdependencies that form the system which is known as the taxi industry

23

PROPERTY OF SYSTEMS THEORY


HOLISM Holistic properties are impossible to detect by analysis, but it should be possible to define them in the system

The stakeholders that make up the taxi industry are separate entities that not only form the whole, but they also have an influence on each other

GOAL SEEKING Systematic interaction must result in some goal of final state to be reached or some equilibrium point being approached

Each of the stakeholders in the taxi industry is part of the system known as the taxi industry. The goals of the various stakeholders are however not the same, but they influence the parts of the system

TRANSFORMATION PROCESS

All systems must transform inputs into outputs

Each component of the system impacts on the other. Through this impact the system as a whole transform any influences or inputs into outputs. This means that if there is an influence on one part of the system, the system as a whole form part of the response or output to the influence.

INPUTS AND OUTPUTS In a closed system the inputs are determined once and for all. In an open system additional inputs are admitted form its environment

Through wanting to achieve different goals the components of the system provide input to each other and this affects the output which impacts on the various components

ENTROPY This is the amount of disorder or randomness present in any system. Non-living systems tend toward disorder. If they are left alone they will eventually lose all motion and degenerate into an inert mass

The goals of the different stakeholders in the taxi industry may not be aligned with each other and may even be in conflict with one another, which may result in turn in entropy

REGULATION The interrelated objects constituting the system must be regulated in some fashion so that its goals can be realised. Regulation implies that necessary deviation will be detected and corrected. Feedback is important for effective control

The taxi associations have specific goals which they want to achieve and this can only be achieved through the application of rules and regulations to the various components of the system. In South Africa the government governs the taxi industry

24

PROPERTY OF SYSTEMS THEORY


HIERARCHY Systems are generally complex wholes made up of small subsystems, which implies hierarchy

The taxi industry and its stakeholders which include the taxi owner, the taxi driver and then commuter creates a hierarchy within this system

DIFFERENTIATION In complex systems specialised units perform specialised functions

The taxi associations have specific functions they perform in the industry.

EQUIFINALITY AND MULTIFINALITY

Open systems have equally valid alternative ways of attaining the same objectives of from a given initial state obtain different and mutually exclusive objectives.

Source: Adapted from Skyttner (1996:20-21)

In the case of the taxi industry from a systems theory perspective, it is important that in the

process of introducing the AFC system, all stakeholders are aware of the potential

introduction of the AFC system. If the introduction does not add value to all the stakeholders

within the system, there may be potential resistance from certain stakeholders and ultimately

total rejection of the innovation. This is so because of the dependencies required for the

system as a whole for function correctly. Marketing as a discipline therefore plays an

important role in the adoption of the AFC solution.

2.3 Marketing as a Discipline

According to the Chartered Institute of Marketing (2009), marketing is a management

process that involves identifying, anticipating and satisfying customer requirements

profitably. Marketing is also a function of promoting goods and services that are

aimed at satisfying the customers’ needs. Similarly Lamb, Hair, McDaniel, Boshoff,

Terblanche, Elliott and Klopper (2012:5) define marketing as a philosophy, attitude,

perspective and a management orientation that focusses on customer satisfaction. In

the context of this study, the adoption of a new innovation in the form of an AFC

system could significantly improve the customer satisfaction levels of commuters.

Lamb et al (2012:10-14) argues that in the field of marketing six competing

philosophies influence an organisation’s marketing activities. The variety of

25

orientations to marketing includes the production, product, sales, consumer, societal

marketing and relationship marketing orientation. This study focusses on the taxi

industry and taxi owners as small-business entrepreneurs with a relationship

marketing orientation towards improving the customer experience of commuters

through addressing challenges in their operational environment. 2.4 Business Management as Discipline

Business management is about achieving set objectives while exercising the four

key functions which include planning, organising, leading and control (Hissom

.2009:4). In its simplest form, business management involves coordinating and

overseeing work activities to ensure that all activities are completed efficiently and

effectively. According to Lefeber and Vietorisz (2004), efficiency involves achieving

the most output for the least amount of input and effectiveness relates to completing

activities so that organisational goals are achieved. In the taxi industry control over

the efficient cash management from fare income has been demised and this loss of

efficient cash management is costing taxi owners. To gain back this control and

mitigate cash loss, innovative solutions can be introduced to the business in order to

address the issue at hand. Through historic information there is evidence that the

introduction of an AFC system into the public transport industry can improve

inefficiencies and improve revenue collection. This may be a practical solution for the

taxi industry in South Africa, but looking at the industry from a systems theory

perspective may impact the decision to adopt as the components of the system do

not function in isolation.

2.5 Innovation

According to Frambach and Schillewaert (1999:2) innovation can be considered as

one of the key drivers for business success. Lazic (2007:12) suggests that

innovation is a process through which creative ideas are brought to life, implemented

and tested. Innovation can not only focus on concept design, implementation also

plays a vital role. If the innovation is not implemented properly it could lead to the

demise of a business (Lazic, 2007:12). The characteristics of the innovation also

have to be suitable for its application (Cornelius, 2012d) and therefore the adaptor of

26

an innovation also with their own characteristics usually considers the products

features and limitations before adoption is considered.

2.5.1 Types of Innovation According to Dickerson and Gentry (1983:225) there are three types of innovations,

namely continuous, dynamically continuous and discontinuous. Dickerson and

Gentry (1983:225) suggest that continuous innovation causes little or no disruption to

behavioural patterns and it simply involves the introduction of a slightly modified

product. Dynamically continuous innovation causes some disruption to normal

behavioural patterns. This form of innovation may involve the introduction of a new

product or even the modification of an existing product (Dickerson & Gentry,

1983:226). Discontinuous innovation involves the introduction of a totally new

product and it will require the users of the new innovation to change their behavioural

patterns totally (Dickerson & Gentry, 1983:226).

The introduction of CSC into the South African taxi environment will totally change

the way taxi owners collect fares and how commuters pay for their trips and would

thus constitute discontinuous innovation. Commuters will have to top up their card on

a regular basis depending on how much money they store on the card and the taxi

owner has to come to terms with receiving digital money. Taxi owners may also have

to pay their drivers a fixed monthly salary for services rendered to the taxi owner,

which is quite different from the norm in terms of how taxi drivers are currently paid.

The possible impact that it may have on taxi drivers is reducing the opportunity for

them to pocket some of the revenue. They may not be in favour of the adoption of

the AFC system because of this reason.

2.5.2 Benefits of Innovation from Various Perspectives Innovation, if applied correctly can drive a business to achieve higher profits through

additional sales and reduced costs which are derived from process improvements

(Samson, 2010:4). Innovation applied in the business can also be used to increase

customer benefits through more value added services (Samson, 2010:13) and thus

customer satisfaction. The application of the AFC system could provide benefits to

27

the taxi owners, drivers and commuters. As suggested earlier some of these benefits

could be operational benefits for the taxi owner, cash security and convenience for

the commuter and cash collection benefits for the taxi driver. In South Africa, the taxi

industry consists of individual taxi owners who collectively make up a taxi

association. In order for the AFC system to be adopted widely amongst taxi owners

in the early stages of the adoption process, a critical mass of taxi owners may need

to display some of the characteristics of early adaptors as suggested by Dickerson

and Gentry (1983:226).

Characteristics of Early Adopters

According to Dickerson and Gentry (1983:226) early adaptors of innovations have:

• more education;

• more income; and

• higher status occupations.

Dickerson and Gentry (1983:226) suggest that better education could relate to the

better comprehension of the functions and performance of the innovation. Higher

income relates to the level of financial risk associated with the purchase of the

innovation. This financial risk is smaller with higher income since the cost of the

innovation is a smaller portion of the individual’s disposable income. Higher status

occupation means that the individual could have more regular exposure to new

innovations and products than individuals with lower status jobs. Taxi owners in the

South African environment can not been seen as early adaptors because they

possibly do not meet two of the three criteria as identified by Dickerson and Gentry

(1983:226). Education levels are generally low among taxi owners and their

occupations are not considered as higher status occupations (Drabile, 2012). These

could be some of the characteristics taxi owners have that could have a negative

influence in the adoption of the innovation.

28

2.5.3 Barriers to Innovation Adoption In a report compiled by IBM Global Business Services (2006) five barriers to

innovation adoption were identified from a business perspective. These are

discussed in the following sections.

Inadequate funding

Inadequate funding refers to the situation where there is not enough money to fund

the initiative (IBM Global Business Services, 2006:2). The taxi owner has to allocate

some of his/her working capital towards the AFC system and may find him/herself in

a situation where he/she may not have enough money to fund the AFC system for

the period required for commuters to get used it. The potential risk for the taxi owner

is that if he/she depletes the funds that were allocated to funding the migration

before the operational benefits are realised, the owner may have to scrap the whole

system and revert back to cash in order to survive. This will result in the owner

incurring a financial loss.

Risk Avoidance

With every innovation there are risks associated with it due to potentially negative

consequences (Solomon, 1999:280). The risks may be unique to the taxi owners and

not yet identified even when background research about the innovation was done.

The IBM Global Business Services (2006:2) report indicates that businesses want to

maintain their health, wealth and peace of mind. These are businesses that are

classified as businesses in their comfort zone and according to IBM Global Business

Services (2006:2) no progress can be made by business without calculated risk

taking. In order for the taxi industry to move to the next level of fare media

acceptance and efficiency enhancement, they have to consider migrating from cash

to card and convince all of its stakeholders of the benefits that will also apply to

them.

Siloing

Within large businesses there are departments and there could be a disconnect

between these departments. In the context of the taxi industry, these departments

could be looked at as the taxi owner, the driver and the commuter. If any of these

29

role players resist the offering it will bring about a barrier preventing the

implementation of AFC. According to IBM Global Business Services (2006:3) a

better understanding of the needs and concerns of the business can be a starting

point in managing the conflict. Taxi owners may have to gain an understanding of the

concerns and fears of their drivers as well as their commuters. Understanding these

concerns will reduce the risk of resistance from the drivers and commuters. It will

also enable them to have a better understanding of their fears in using this new

product as opposed to physical cash which is what they are used to.

Time commitments

According to the IBM Global Business Services (2006:4) time is a very precious and

scarce commodity which can’t be wasted. The application and integration of AFC

into the taxi owner’s current operations will enhance productivity in terms of cash

collection and possibly faster throughput. On the other hand the time the taxi is taken

off the road to undergo terminal installation may prove to be too expensive for the

taxi owner because that is lost income for the day which each taxi is not operating.

Incorrect measures

Many businesses use revenue and profits as a measure of success (IBM Global

Business Services, 2006:5). In the case of an innovation that is truly specific to an

industries business, information may not be available to truly convince the innovation

adaptor that the innovation will achieve their expectations. In the South African

environment there is no data specific to the taxi industry. There is only data available

to the bus, and rail services. This lack of information may further add to the risk

element in the eyes of the taxi owner and negatively influence their decision to adopt

the innovation. Despite all the identified barriers there are also benefits that a

business can achieve if the innovation has been applied properly (Samson, 2010:4).

Barriers to Innovation from a Commuter Perspective

From a commuter perspective Ram and Sheth (1989:6-7) have identified five

potential barriers to innovation which are applicable to the taxi commuters and AFC.

These barriers include usage, value, risk, tradition and the image barrier.

30

Ram and Sheth (1989:7) suggest that the usage barrier relates to the innovation not

being compatible with existing practices or habits. To further add to the resistance,

taxi commuters may see the innovation as an offering that does not offer strong

value for money as outlined in Table 1.

The risk barrier represents the level of uncertainty that the commuter has towards

the AFC (Ram & Sheth, 1989:8). Laukkaanen, Sinkkinen and Laukkanen

(2008:3062) suggest that uncertainty is inevitable with all innovations which support

statements made by Rogers (1962:174). The innovation to the man in the street in

this instance may be too advanced for local commuters. This could lead to

commuters fearing the product as they do not physically see their money which is

what they are used to. Public transport commuters in South Africa are generally poor

and although some may have bank cards they still may want to use cash as a means

of payment.

The tradition barrier refers to the deviation from cultural tradition which may be

created by the innovation (Ram & Sheth, 1989:8-9). The physical handling of money

in South Africa may have some cultural significance that we are not aware of.

The image barrier refers to resistance created because of the origin of the innovation

(Ram & Sheth, 1989:9). This origin can be in terms of country or even in terms of

business. Although there is no real evidence that suggests that South African

commuters dislike products such as plastic cards which were produced in America

(Rankl & Effing, 1997:2) this could be one of the unknown barriers to this innovation.

Barriers to Innovation from a Taxi Owner Perspective

Barriers to innovation from a taxi owner perspective could be directly linked to the

characteristics of early adopters suggested by Dickerson and Gentry (1983:226).

Taxi owners in South Africa usually don't have high education levels, their

occupations are not regarded as high status occupations and the amount of money

taxi owners make is questionable, some make a lot of money and other owners

make just enough money to be able to survive (Drabile, 2012). The perceived

characteristics of the taxi owners could be barriers to the innovation.

31

2.5.4 Decision Process As consumers come across problems they need to explore various options and

make decisions in order to solve their problems (Hawkins & Mothersbaugh, 2010:

496). Rogers (1962:164) has identified five steps in the innovation decision making

process which an individual or business has to go through before an innovation is

adopted.

Knowledge

According to Rogers (1962:164) individuals and businesses play a passive role in

the exposure to an innovation. He suggests that individuals or businesses can not

actively seek information about an innovation until the individual or business knows

that the innovation exists (Rogers, 1962:164). Individuals therefore expose

themselves to new information about products or services if it falls within their area of

interest or need (Rogers, 1962:166).

Taking into consideration the statements made by Rogers (1962:170) the current

challenges faced in the South African taxi industry as highlighted by Ndebele (2011)

should have led the taxi owners to seek information about possible new innovations

that could help them address some, if not all of the current challenges that they are

facing in their industry. If the innovation is not in the country, the technology could be

imported from a country where it is available.

The introduction of the Gautrain could have possibly led taxi owners to try and

understand the type of technology and fare media type that this transit operator

uses. The bus and rail service are forms of transport and this should fall under an

area of interest for taxi owners. This could suggest that taxi owners have in some

way or other heard of this technology and have been exposed to additional

information about it.

Persuasion

The term persuasion in this context as described by Rogers (1962:169) refers to an

attitude formation from the perspective of the individual or business adopting the

innovation. In terms of a product or offering, an attitude can be described as the way

32

one thinks, feels and acts towards the product in question (Hawkins &

Mothersbaugh, 2010:392).

During the persuasion stage the individual becomes more psychologically involved

with the innovation (Rogers, 1962:170). What aids in this process is that the

individual actively seeks more information about the innovation and even goes as far

as imagining the use of the innovation in the current working environment as well as

in a future situation. Solomon (1999:274) suggests that consumers may actively

search the marketplace for information after a need has been recognised.

According to Hansen (2011:2) the consumer decision making process is one that is

very complicated and could possibly involve a number of constructs. Many

innovations have a degree of fear and uncertainty associated with them. Therefore

part of the individual’s information seeking process includes consultation and

innovation evaluation information from past users in order to reduce the innovation’s

perceived risk (Rogers, 1962:170).

Decision Stage

A method to assist the adopter in the decision process and reduce the level of

uncertainty is to partake in a pilot run. A pilot is a form of partial adoption of the

innovation and making use of it in a real world environment. This practice is done to

reduce uncertainty relating to the innovation and potentially increase the chances of

the adopter adopting the innovation (Rogers, 1962:172).

A pilot programme is currently underway in the City of Cape Town and

Pietermaritzburg to assess the AFC system in the taxi industry. The pilot programme

is currently run under controlled conditions but detailed feedback obtained from the

pilot according to Rogers (1962:172) should assist in making the decision to adopt

the AFC system.

Implementation Stage

This phase occurs when the adopter puts the innovation into use. Rogers (1962:174)

suggests that in this phase there is still a degree of uncertainty even though the

adopter decided to go ahead with the innovation. This is a clear indication that

33

although the adopter obtained information about the innovation, the adopter is still

uncertain about how the innovation may uniquely affect their business.

Most businesses consist of stakeholders which could be the ones that resist the

innovation. In the taxi industry, the heart of the industry is the commuter and taxi

driver. Without the commuter and taxi driver buy in, there would be no revenue for

taxi owners. Therefore if the commuter resists the use of AFC the taxi owners will not

achieve their anticipated outcomes of the innovation because of poor uptake

Cornelius (2012b).

As was mentioned earlier, what could contribute to the fear and resistance of

innovation adoption could come from a customer or business perspective or a

combination of both which could affect the decision to implement the innovation. Taxi

owners and taxi drivers could reject the system (business perspective) or taxi

commuters (customer perspective).

Confirmation Stage

This is the final stage of the innovation decision making process. By taxi owners

implementing an innovation, it is not an automatic indication that the innovation has

been totally accepted. Taxi owners may still decide to revert back to their previous

operating model. Rogers (1962:184) suggests that the individual or business will

seek reinforcement for the innovation decision that was made.

In the case of the City of Cape Town, a monthly Management Information (M.I.)

report from their banking partner allowed them to monitor the use and uptake of the

myconnect smart card. If uptake became suddenly poor and usage drops, the city

could possibly revert back to the old system. Rogers (1962:184) also suggests that if

the innovation turns out to not achieve the operational advantages expected, this

could lead to the rejection of the innovation.

2.5.5 Characteristics

From a taxi driver’s perspective, the innovation of AFC may allow the taxi owners to

realise the operational benefits as identified by the TTC Fare Collection Study

34

(2000:28) or the advantages of using smart cards as described by Plotnikov

(2001:57). What can potentially influence the adoption of the innovation is the

compatibility and complexity of the innovation (Dutton, kahin, O’Callaghan & Wyc

Koff, 2005: 1). According to Sahin (2006:17), the characteristics of innovatioion

includes: (1) complexity, (2), compatibility, (3) relative advantage, (4) trialability and

(5) observability. Each of these is discussed in the next section.

Complexity

Complexity relates to the how difficult the innovation is for the potential adopter to

grasp. The higher the level of complexity, the lower the rate of adoption (Sahin,

2006:18). During the knowledge gathering stage of the innovation decision making

process taxi owners’ have the opportunity to assess the level of complexity of the

innovation and this will aid them in deciding if the innovation is too complex for them

or their stakeholders to adopt.

Compatibility

Compatibility relates to how the potential adopter perceives the new innovation to fit

into their current lifestyle and needs. Sahin (2006:18) suggests that if an innovation

is compatible with the potential adopters needs uncertainty about the innovation is

decreased and the likelihood of innovation adoption will increase. The South African

taxi industry is a cash based industry and migrating to a card based system is a

concept that is new for the majority of the commuters, drivers and owners. The AFC

system and the use of the CSC card may be incompatible for the South African taxi

industry.

Relative Advantage

Sahin (2006:18) suggests that relative advantage is the perception that the

innovation provides more satisfaction to the potential adopter than a solution that

already exists. The operational advantages highlighted by the TCC study (2000:28)

could be experienced by the taxi owners. However, the potential operational

advantages that could be achieved by the taxi owners may not out-weigh the

potential complexity and compatibility issues of the AFC innovation.

35

Triability

Trialability relates to the relative ease of experimenting or testing the innovation

before a decision is made by the potential adopter (Sahin, 2006:18). Taxi owners

may only be willing to adopt the innovation if they are able to pilot the innovation.

Taxi owners may adopt the innovation but the stakeholders also need to adopt the

innovation in order for the AFC system to function properly.

Observability

Sahin (2006:18) describes this as the degree to which the results of the innovation

are visible. For the taxi owners this information is available from the banking partner

that the City of Cape Town collaborated with. The results of the innovation AFC

system that was applied to the buses may not necessarily be related to taxies but

this could give the taxi owners an example of what they can expect if it was applied

to their industry.

2.6 Background of the South African Payment Environment Related to

Transportation

In the South African economy there is reliance on money in the form of coins,

banknotes, cheques, credit/debit cards and also electronic transactions. Dr Monde

Mnyande, who was the Chief Economist and General Manager of the South African

Reserve Bank, mentioned at a Bank Note Design Competition Gala which was

hosted in the City of Tshwane, that "In addition to the traditional coins and banknotes

and other paper-based instruments, direct debit and credit transfers, debit and credit

cards, and telephone banking as well as internet banking facilities have become

more widely available. Electronic systems have rapidly increased in importance, both

for retail and wholesale transactions to the point where they now account for the

majority of payments in the formal sector, by numbers as well as by value"

(Mnyande, 2007:2).

Despite this, there is still a large portion of the economy that makes use of cash as a

method of payment for goods and services and the handling of money comes at a

cost. These costs include but are not limited to distribution costs and the storing of

36

notes (Bergman, Guibourg & Segendorf, 2008:42). Risks associated with the

physical handling of money include leakage costs, which is the removal of some of

the total sum of money that is to be delivered, making use of cash-in-transit services,

robberies and cash heists. Leakage is high in the taxi industry (loss of revenue due

to theft usually by taxi drivers). It not only affects the owners of the transport vehicles

or buses but it also affects the amount of revenue received by the government in the

form of taxes on this income if it has been declared.

2.7 The South African Taxi Industry

As was mentioned in Chapter 1, the taxi industry was closely tied to apartheid and

black South African's found it almost impossible to obtain a permit to operate in the

taxi industry (Barrett, 2003:6). The Motor Carrier Transportation Act of 1930

stipulated that the transportation of goods or services was not allowed without

permission from the Local Road Transportation Board (LRTB) (Sekhonyane &

Dugard, 2004:13).

Due to the fact that taxi owners found it difficult to obtain permits to operate vehicles,

corruption between taxi owners and law enforcement officials became common with

the issuance of fraudulent permits (Barrett, 2003:8). With limited available

transportation options for commuters the taxi industry grew at a phenomenal rate

(Fourie, 2003:2-3). According to Sekhonyane and Dugard (2004:14) black

commuters found this form of transportation popular because taxis (1) provided late

night transportation; (2) travelled to places where other forms of transportation did

not travel; (3) charged affordable rates; and (4) had shorter queues than that of the

queues for buses.

According to Sekhonyane and Dugard (2004:13) prior to deregulation in 1985, taxi

operators had defy laws to provide a transportation service to commuters.

Fortunately for taxi operators deregulation was to take place in the coming years.

Deregulation

Once deregulation of the taxi industry took place in 1985, permit enforcement halted

and the industry was then flooded with operators. During this time of massive and

37

accelerated growth within the industry, signs of over-saturation in some areas

around the country set off violent battles between taxi owners who were fighting for

routes all over the country (Barrett, 2003:7). The results of these “Taxi Wars” were

the death of between 1500 and 3000 people between 1994 and 2000 (Barrett,

2003:8). Despite the negative impact of the "Taxi Wars", the taxi industry had

created an environment of employment among South African's.

Employment in the Taxi Industry

Ndebele (2011), indicates that the taxi industry is made up of more than 125 000

owners and it creates an estimated 600 000 jobs, directly contributing to

unemployment reduction in the country. Drivers within the taxi industry make up the

majority of workers in the industry (Ndebele, 2011; Barrett, 2003:9). According to

Barrett (2003:9), there are more wage employed drivers than self-employed drivers

in the industry. Wage employed drivers are drivers that are employed by taxi owners

and are paid in four different ways (Ferreira, 2010:29):

• Drivers’ are not paid a basic wage, but rather pay a percentage of the week’s

takings to the owners and keep the rest as their own income.

• Drivers’ receive a basic wage and then pay the owner a percentage of the

week’s takings and then keep the rest as their additional income.

• Drivers’ pay in all the money that they receive to the owner and then the owner

pays the driver a regular wage (this is uncommon).

• Drivers’ give the owner all the money that they receive in the week and the

owner allows the driver to keep all the income on an agreed day of the week.

Dealing with so much cash and no recording of cash collected leads to a loss of

money as there are many loop-holes in this method of collecting cash. Barrett

(2003:9) suggests that taxi owners claim that up to 50% of their takings are stolen by

drivers. This may indicate that the current fare media type used in the taxi industry is

not favoured by taxi owners and they may be willing to take on the innovative CSC

as a new fare media type. From the available fare media, the innovative AFC system

has been in operation in America and European countries for a number of years

now. This system was introduced into these economies to increase both the

efficiency and attractiveness of public transportation services (Thomas, 2005:803).

38

According to Dodgson and Gann (2010:14) most innovations are incremental from

what is current. This is also the case with fare media, whereby a new fare media

type is developed to address the shortfalls of fare media that is being used.

2.8 Fare Media

Fare Media can be described as the accepted payment instrument by transit

operators as proof of payment for the use of their services (Plotnikov, 2001:47).

Before electronic fare media was introduced other forms of media were available and

still exist today in many economies as depicted and described below by Plotnikov

(2001:47). Fare media options or types of Fare Media are outlined in Figure 2.1.

Figure 2.1: Transit Operator Fare Media Options / Types of Fare Media

Source: Plotnikov, 2001:58

2.8.1 Non-Electronic Fare Media Options A number of non-electronic fare media options exists and are outlined below.

39

• Cash

Coins have been the most widely accepted medium for payment of transit services.

Once the cost of transport increased transit operators began to accept notes in

addition to the already accepted coins. Cash in many economies is the major

payment method that individuals use because it is readily available (Plotnikov,

2001:48). In South Africa the use of coins is still a common sight and is still the most

popular medium within the taxi industry (Ndebele, 2011). For transit operators this

meant that all of their potential clients had access to cash and there were no

modifications required for the transit operator’s equipment in order to accept cash.

Barriers

In the United States of America, barriers of using cash for transport payments started

to emerge particularly when the fare structure started to change to cater for many

variables that were used to calculate the price of the fare (Plotnikov, 2001:48). These

barriers could have also been the reasons why some transit operators in South

Africa such as Metro Rail made the migration to paper based tickets.

These variables include:

• distance travelled;

• time of day;

• rider type ( adult, student, disabled or senior).

The introduction of alternative media for transit operators was also due to fraud, theft

and the growing administrative work required in recording such transactions for audit

purposes.

• Tokens

These were one of the most popular forms of fare media and were available in a

variety of forms and materials (Plotnikov, 2001:49). Tokens can be in plastic or metal

and can vary in size or shape. One of the major benefits that was achieved with

tokens was the ability to accommodate the various pricing structures for pensioners

and volume discounts which encouraged and increased the use of public

transportation services (Plotnikov, 2001:49).

40

Barriers The use of tokens meant that transit operators had to perform additional revenue

collection activities such as production of tokens, distribution, valuation, collection

and the recirculation of tokens. To the commuter tokens meant that they could only

use the token with a specific transit operator which was not the case with cash

(Plotnikov, 2001:50).

• Paper Tickets Paper tickets as a fare media is very similar to the token. The major difference is the

material used. The fact that the material used to make paper tickets is paper; made

them easier and cheaper to produce than the token. Tickets could also easily be

removed from circulation and invalidated than the token (Plotnikov, 2001:50). Transit

operators also favoured this form of fare media because it could also accommodate

distance based fares by having the travel times and stops that the commuter was

entitled to, which further added to the fare structure that was available to commuters.

The bus and train industry in South Africa to this day still makes use of a paper

based ticketing system. However these two transit operator types are slowly making

a shift towards contactless smart card payment options.

Barriers

Although there are added benefits to that of the tokens, paper based tickets are

more prone to counterfeiting (Plotnikov, 2001:50).

• Paper Passes

Paper passes which are also known as flash passes almost have the same concept

as a paper based ticket. The commuter is only subjected to a visual inspection of

their ticket (Plotnikov, 2001:50). The difference here is that a paper pass gives the

holder of the pass a window period in which to use the transit operator’s services.

This could be a week or even a month where the pass becomes invalid after its

"valid to" date has lapsed (Plotnikov, 2001:50). The paper passes are usually issued

out at a discount price and in some instances even rider type discounts are applied

making it attractive to commuters. This form of fare media is still used today in bus

services that operate around mines in South Africa. Miners purchase passes which

41

are usually weekly based and as they enter the bus the miners show their passes

and the bus driver does a quick visual inspection of the pass. The Golden Arrow Bus

Service in Cape Town also makes use of a paper pass type system but their passes

are made out of plastic (Golden Arrow Bus Service, 2012).

Barriers

For the transit operator, use of paper passes can lead to high levels of fraud. For the

commuter, paper passes usually require a high prepayment for the pass and if they

were to lose their ticket the pass can't be recovered (Plotnikov, 2001:51).

As transit operators developed new fare structures to accommodate and meet

commuter demands, the complexity of the various forms did not only make it difficult

to effectively administer, it also drove up operational costs. The next phase of

innovation was electronic fare media which had the ability to easily support complex

fare media structures while keeping administrative costs down. Although this was the

first step in the development of the CSC, the older forms of fare media such as cash,

paper tickets and passes still remain and will still take some time to be phased out.

2.8.2 Electronic Fare Media Options At the same time, a number of electronic fare media options exist which are outlined

below.

• History of Plastic Cards According to Rankl and Effing (1997:2) the introduction of the plastic card started in

the United States of America (USA) in the early 1950s. The material that was used to

manufacture plastic cards was polyvinyl chloride (PVC). This allowed for the

production of durable and long lasting cards which were better suited for daily use as

opposed to the paper equivalent (Rankl & Effing, 1997:2).

The first trans-regional plastic card used for payment of goods and services instead

of cash was issued out by Diners Club in 1950 (Rankl & Effing, 1997:2). With the

entry of the two major card associations, namely Visa and MasterCard, the

42

proliferation of the plastic card occurred at a rapid pace. This occurred first in the

USA, then Europe and then the rest of the world (Rankl & Effing, 1997:2).

• Magnetic Strip Tickets and Passes for Transit This form of fare media was first introduced in the 1960s in the United Kingdom (UK)

and the United States (Plotnikov, 2001:51). The innovation and concept of electronic

fare media came from the banking industry. This form of payment acceptance was

very expensive for most transit operators and was only adopted by large transit

operators such as the Bay area Rapid Transit (BART) in San Francisco and the

London Underground rail service in the UK (Plotnikov, 2001:51).

The magnetic strip (MS) media has two main elements: The carrier and the layer of

magnetic material. The carrier can be made out of paper or plastic and the magnetic

material comes in two types of material: low-coercivity or high-coercivity. Low-

coercivity MS media can be easily damaged by magnetic interference such as

bringing the MS ticket in close proximity to a speaker or even cell phone (Plotnikov,

2001:52). High- coercivity MS media are more resistant to most magnetic fields and

will not be affected from most types of magnetic fields. The use of electronic fare

media also reduces administrative costs because these are electronically tracked

and stored (Cornelius, 2012c). The next level of progression from the MS was the

smart card which opened new doors and opportunities to transit operators.

• Integrated Circuit Smart Cards Smart cards are the latest development in electronic fare media for transit operators.

The smart card concept was first patented in 1970 by Dr. Kunitaka Arimura of Japan

and further developments took place throughout the 1970s (History of Smart Cards).

This smart card technology is gaining greater acceptance within the public transport

industry in South Africa as seen with the Gautrain rail service in Gauteng and the

MyCiTi bus service in the Western Cape. These cards can also be used for retail

applications and not only transit which further adds to the convenience factor

(Cornelius, 2012c). In its physical form the smart card looks similar to a normal credit

or debit card. Countries in Europe and Asia-Pacific offer smart cards as their primary

43

accepted fare media or as a secondary option to their traditional options (cash, paper

tickets, paper passes) which further adds to consumer convenience.

The smart card has three interfaces available which include:

• contact;

• contactless; and

• dual-interface.

Contact Interface

In order for the card to function, the smart card must be inserted into the Point of

Sale (POS) or card reading device. For a transaction to occur the chip must be

properly aligned with contacts within the card reading device and transactions can

take up to seven seconds to conclude (Cornelius, 2012c). This is not suitable for

transit applications because transaction time in this industry is an important factor.

Contactless interface

With a contactless interface, the smart card does not require any physical contact

with a contactless card reader. There is an antenna in between two plastics that

holds the card together. This antenna communicates with the contactless card

reader by using radio frequency (RF). Power to transmit this RF is drawn from the

contactless terminal and transactions are concluded in less than 0.1 seconds making

this form of payment suitable for transit applications (Cornelius, 2012c). This

technology is currently in use in the MyCiTi Cape Town buses and the Gautrain,

which is a high speed train service that operates between City of Tshwane and

Johannesburg.

Dual-interface

These smart cards have both contact and contactless features. According to

Cornelius (2012c) in the South African environment this type of interface would be

the most suitable because users of the card would still be able to use the card at

retailers who don’t have contactless card readers installed.

44

Benefits

In addition to the operational benefits that were highlighted by the TCC fare

collection study (2000:28), Plonikov (2001:57) suggests that smart cards are far

more superior to traditional fare media (non-electronic forms) in terms of durability

and life cycle. These cards can also be automatically replenished when linked to a

credit card account (Plonikov, 2001:57). This feature according to Cornelius (2012c)

is dependent on country or region and the rules set up by government which banks

have to comply with. CSC technology has many benefits to both to the commuter

and to the transit operator. However there are certain barriers that may exist on

implementing this technology which could have some negative influence on the

adoption of this technology by South African taxi owners.

Perceived barriers to the adoption of CSC

In South Africa there are incremental shifts taking place from cash to electronic

payments for public transport. The government is positioning South Africa to accept

such payment methods within its transport network and transform the way South

Africans pay for transportation. On the 27th May 2011 the Minister of Transport,

S'busiso J Ndebele, under section 8(1) (b) of the National Land Transport Act 2009

(Act No.5 of 2009) signed the amendments made to the schedule relating to AFC.

This schedule was published and made available on the 17th of June 2011. The

requirements for AFC system implementation in public transport are as follows:

• AFC should be made possible through bank issued contactless smart cards.

• AFC must be interoperable through all participating banks.

• Clearing and settlement of payment transactions must take place through the

National Payment System Act, 1998 (ACT NO. 78 of 1998).

• Passengers with a suitable bank account must be able to use bank issued fare

media obtained as a result of their relationship with any participating bank.

• Passengers without a suitable bank account must be able to use bank issued

fare media from a participating bank or a third party card issuer operating in

conjunction with the participating bank.

• The payment system must adhere to the banking and payment regulatory

framework.

45

• The data structure (NDoT) must be loaded onto all bank issued fare media

(National Land Transport Act, 2009) which will allow for distance based fare

within the republic.

Having this act in place is a strong indication of the willingness and support of the

South African government to allow for the implementation of AFC. This innovation

could potentially address a lot of the issues that taxi operators are currently facing.

Key Features of the CSC

The key features of the CSC include (Cornelius, 2012d):

• The CSC allows for both contact and contactless transactions. The card has an

antenna inside the card which communicates with a contactless card reader. All

the cardholder has to do is tap the card to pay for goods or services. Where there

is no card reader present, the card can be swiped or inserted to pay for goods

and services. All contact transactions will require a PIN code to be entered.

• The card can be used anywhere in South Africa for the purchase of goods or

services at any retailer or service provider displaying the card association

relevant to the card (MasterCard® with PayPass™, MasterCard® Cash or Visa

PayWave).

• All contactless purchase transactions done with the card are offline transactions

and do not require PIN entry or signature. Money sits on the chip and any

purchases done with the card is approved against the available balance on the

card.

• The cardholder can obtain a mini statement, view their available balance and

load funds from the issuing bank’s ATM’s, participating bank branches,

participating merchants or service providers displaying the MasterCard® with

PayPass™, MasterCard® Cash or Visa PayWave logos.

• Cards will be valid for a period of at least 36 months from date of issue. The card

will expire as per the date printed on the front of the card. Once the card expires,

the card holder will need to obtain a new card and the balance of the funds are

transferred onto the new card.

46

• A card load fee will be charged for all card loads but no transaction fees will be

charged for the purchase of goods and services. (2.5% of load amount, but may

differ from various other financial institutions).

• If a card is lost or stolen, the incident can be reported to the financial institution

that issued the card. A replacement card will then be issued to the cardholder (at

a fee) and funds from the lost/stolen card transferred to the new card. This will be

done 30 days after the hold was put on the lost/stolen card. The remaining

balance on the card could be less than it was on the day you reported the card

lost/stolen. This would happen if any offline transactions took place. This is so

because this products objective is to replace physical money, so just like in

instances where you lose your wallet and there is money inside the wallet the

money is usually stolen, the same applies to the card. If there are no transactions

that occurred on the card in a 30 day period the card holder will receive the

balance on the card when it was reported stolen.

Card Load Channels

The CSC can be funded through various load channels and this includes (Cornelius,

2012d):

• ATMs - These are Automatic Teller Machines that accept bank cards or cash and

have the ability to prefund CSCs. These devices in most cases operate 24 hours

a day and are usually located in convenient locations i.e. Petrol stations, mini

markets and outside bank branches.

• Bank Branches - These are normal bank branches where the commuter can visit

and have their CSCs prefunded. Branches usually operate for about 8 hours per

day.

• Internet Banking - This is an electronic channel where if the commuter has

access to the internet at home or at work they can transfer funds from their

existing bank account onto the smart card.

• Merchant Loads - Merchants are retailers that have opted to provide the service

of funding CSCs. Making use of this channel is more costly to the card holder as

the merchant usually charges a small "convenience" commission on top of the

2.5% load fee that is charged to prefund the CSC.

47

Limitations of the CSC

The limitations of the CSC include (Cornelius, 2012d):

• No cash withdrawals are possible with this product (eg: No cash back

transactions, ATM withdrawals or over the counter withdrawals at financial

institution branches).

• A maximum value of R3000 may be loaded onto the card per calendar month but

not in a single load transaction. The maximum amount that can be loaded onto

the card at a time is R1500 and this is also the maximum balance that can be

maintained on the card at any given time. Any purchase transaction with the card

is limited to R200 per transaction.

• Only Rand(R) currency can be loaded and the card can only be used locally

(South Africa).

• No interest is earned on the funds available on the card.

2.9 Conclusion

Innovation can be considered to be one of the key drivers for business success.

Although this may be the case they are various aspects of innovation that have to be

considered, which includes the characteristics of early adopters, the innovation

decision making process as well as the characteristics of the innovation. What could

be discovered in this research is that one of the aspects of innovation could

supersede the other even if there are potential benefits to be realised with the

adoption of the innovation. The systems theory provides a basis for understanding

the taxi industry and the decision-making of taxi owners as the AFC system is

dependent on the CSC while the taxi industry is dependent and impacted by its

stakeholders.

The payment environment in South Africa has progressed from cash to card. From a

fare media perspective, the incremental innovations of fare media types to address

the operational challenges within the transport industry have led to the AFC system

being developed which addresses most of the challenges of previous fare media

types. Although this fare medium is now available, other forms of fare media

mentioned previously are still used and in particular cash.

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In the South African environment cash still plays a vital role in the economy and

because of its popularity in the taxi industry, taxi owners may find it difficult to make

the migration to AFC systems despite the identified operational advantages that can

be achieved. Furthermore, if there is acceptance from taxi owners after going

through the innovation decision making process, resistance could still come from a

customer and taxi driver perspective. The customer perspective refers to the

commuters who are one of the more important stakeholders in the industry.

The next chapter of the research describes the mythology that was used to gather

the information required to assess the views of selected South African taxi owners

regarding the adoption of an AFC system.

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CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

This chapter outlines the research design that was followed to achieve the purpose

of the research namely to determine the views of selected South African taxi owners

regarding adopting an Automated Fare Collection (AFC) system in the South African

taxi industry. The introduction of AFC into the South African taxi environment is a

new and additional approach to fare collection within this industry. This form of fare

collection has not been commercially introduced into the taxi industry and therefore

there is very little information on the perceived barriers and benefits to adopting this

technology into a largely cash dominated environment (Ndebele, 2011). Therefore a

qualitative paradigm was used to gain a deeper understanding of the views of South

African taxi owners.

The chapter further outlines the research objectives that guide the investigation, the

sampling design, the interview guide, data collection methods, data analysis

procedures, the pilot study and the rigour and ethics associated with the study.

3.2 Research Design

In the selection of which research approach to use, both quantitative and qualitative

research approaches were considered. Terre Blanche, Durrheim and Painter

(2006:47) suggest that quantitative researchers collect raw data in the form of

numbers and analyse this raw data using statistical types of data analysis. Some

methods used for quantitative research identified by Silverman (2000:3) include:

• Social surveys: This includes random samples and measured variables; and

• Official statistics: The analysis of previously collected data.

For qualitative research Terre Blanche et al. (2006:47) suggests that qualitative

researchers collect data from speaking to people and then analyse this data by

coding and placing the coded information into categories. Babbie and Mouton

(2001:270) further add to this definition by defining qualitative research as the study

50

of human action from the perspective of the social actors themselves. In summary,

Silverman (2000:8) suggests that qualitative research provides a deeper

understanding of social phenomena than what quantitative research does.

Due to the fact that AFC is still fairly new in the South African transport industry, a

deeper understanding of the adoption of AFC within the taxi industry in South Africa

were sought. Therefore a qualitative research approach was used in this study.

3.3 Problem Statement

From a taxi owner's perspective, the current cash based payment to taxi drivers by

commuters facilitates cash theft and money laundering by taxi drivers and owners

which is time consuming. The introduction of an AFC systems may address the

issues associated with a cash based payment system. The NDoT and the Minister of

Transport with his amendments to the land transport act on the 17th of June 2011,

support the introduction of the new AFC system. However, for an AFC system to be





adopting such a system. The problem statement translates into the general research

question being investigated:



A number of research questions arise as a result of the general research question:

• What are selected South African taxi owners’ levels of awareness and

knowledge of an AFC system?

• What are selected South African taxi owners perceptions of the benefits,

barriers and industry challenges to adopting an AFC system?

• How do selected South African taxi owners see the role of the NDoT in

adopting an AFC system?

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3.4 Purpose of Study

South Africa has two types of payment methods for its public rail network. Ticket

based payments which Metrorail uses and AFC which the Gautrain rail system uses.

The ticket based system used by Metrorail creates an environment that is not

commuter friendly. Long queues are formed at kiosks to get tickets before boarding

the train. There is possible loss of revenue through theft of money and counterfeit

tickets (TTC Study, 2000:28). The newer Gautrain rail service makes use of an AFC

system with automated card load self-service terminals. This is where commuters

feed cash or swipe their bank cards on a device that looks like an Automated Teller

Machine (ATM) to refund their cards. The commuter then taps their cards to make

payments through a series of gates to enter onto the train. The commuter also uses

the same card and taps it on a contactless terminal in a bus to make payment for a

bus ride. The use of this technology by the Gautrain transit operators has resulted in

the operational benefits identified by the TTC Study (2000:28). The introduction of

new technologies can be seen as a progression from what is current, replacing and

closing up loop holes of old systems or processes. According to Snow (2004:2-3)

new technologies replace and force old technologies out of inefficient applications

and are usually efficiency-enhancing. Thus, the introduction and adoption of an AFC

system in the South African taxi industry may address some of the problems and

challenges this industry is facing. However, in order for such a system to be

introduced and adopted by all the relevant parties in the industry, taxi owners need

to be aware of and have knowledge of both the benefits and barriers associated with

such a system. For this reason, this research focuses on exploring the views of

selected South African taxi owners regarding adopting an Automated Fare Collection

(AFC) system in the South African taxi industry.

3.5 Research Objectives

The study is guided by the following specific research objectives as they emanated

from the problem statement and research questions:


among selected South African taxi owners.

52


to adopting an AFC system of selected South African taxi owners.


NDoT in adopting an AFC system.

3.6 Sampling Design

According to Silverman (2001:248) the purpose of sampling is to study a

representative subsection of a defined population to come to a conclusion about the

whole population. This involves certain decisions such as selecting the correct

people, behaviours, settings and/or social processes to observe (Terre Blanche et

al., 2006:49).

For this research, the City of Tshwane was selected, because this region had an

estimated population size of 2,345,908 in 2008 (City of Tshwane Municipality

Household Survey, 2008:7). Around 21% of the total population makes use of taxis

daily to commute to work which is the highest among all available public transport

options in this city (Cameron & Krynauw, 2001:20).

According to Wimmer and Dominick (2003:84) a population is a group or class of

subjects and a sample is a subset of the population that is representative of the total

population. For this research, the participants were only taxi owners that resided and

operated in the City of Tshwane region. The target populations for this research were

20 taxi owners from one of three townships namely Soshanguve, Attridgeville and

Mamelodi. The target population had to adhere to the following criteria because it

would contain the research to the City of Tshwane and taxi owners with more than

one taxi are expected to experience more business challenges:

• Taxi owners could include both male and female; and

• taxi owners only operated in the City of Tshwane area and did not venture out of

this region.

Taxi drivers were approached at taxi ranks in the City of Tshwane. The taxi ranks

visited were based in Menlyn, Mamelodi, Attridgeville and Shoshanguve. Snowball

53

sampling was used to recruit more participants in this study. According to Babbie

and Mouton (2001:167) snowball sampling is a form of accidental sampling. This

form of non-probability sampling is initiated by collecting data on the few available

individuals of the target population and then asking those individuals for information

other individuals that fall within the target population needed to be located. A total of

20 taxi owners were located through this approach. This number of taxi owners were

necessary because if the minimum target population criteria was met and each taxi

carried on average 16 commuters this would equate to 640 commuters transported

daily by 40 drivers. The potential business challenges that the taxi owners would

experience were sufficient for this research.

All participants were encouraged to specify any time and location that they were

most comfortable with. Taxi owners were given this option because of the sensitive

nature of the taxi industry and rivalry between taxi associations for routes. After

giving the participants this option, the interviews were primarily conducted at an

office in the association that the participants' were members of, or at the participants’

place of residence.

3.7 Data Collection

According to Creswell (2009:178) data collection involves setting up parameters for

the study which involves collecting information and setting protocol for recording

information. Creswell (2009:178) further suggests that data collection methods

include:

• observations;

• in-depth interviews;

• documents; and

• audio-visual materials.

For this research, in-depth interviews were used, because in-depth interviews are

more focused on the reasons behind the answer the participant gives (Wimmer &

Dominick, 2003:127). Smaller samples are usually used as opposed to surveys and

participants are expected to provide as much detail as possible in their responses

54

(Wimmer & Dominick, 2003:127). Where participants provide answers with not

enough detail, the participant were probed to elaborate and provide more information

(Babbie & Mouton, 2001:289). According to De Beer, Barker, Botha, Claassen, de

Klerk, de Villiers, Diederichs, Froneman, Hooyberg, Louw, Maree, Mbennah,

Mersham, Roodt, Scholtz, Skinner, Steyn, Teer-Tomaselli, van Vuuren and Verwey

(1998:406) as well as Wimmer and Dominick (2003:127) in-depth interviews have

both advantages and disadvantages. These are presented in Table 3.1

Table: 3.1: Advantages and Disadvantages of In-depth Interviews Advantages Disadvantages

Participants are more motivated to participate and respond through a one on one session (De Beer et. al., 1998:406).

The interview process is usually long and both parties could become tired (De Beer et. al., 1998:406).

More accurate responses on sensitive issues are provided (Wimmer & Dominick, 2003:127).

Interviews usually not standardised and different versions of the same questions could be asked were different answer could be (Wimmer & Dominick, 2003:127).

Higher success rates are achieved with one to one interviews (De Beer et. al., 1998:406).

It is an expensive data collection process (De Beer et. al., 1998:406).

It allows for probing to be more effective and to understand underlying issues and motivations to the comments made during the interview (Wimmer & Dominick, 2003:127).

Some questions may be difficult to ask and difficult for the participant to answer and may even embarrass both parties (De Beer et. al., 1998:406).

All individuals irrespective of education or literacy level can easily participate (De Beer et. al., 1998:406).

It allows more control over the interview process since he is administering it (De Beer et. al., 1998:406).

This method was chosen because a deeper understanding of the personal issues

and experiences surrounding the adoption of AFC were needed. According to

Saldaňa (2011:32) interview formats can consist of highly structured, unstructured

and even prearranged, but spontaneous formats. In this study semi-structured

interviews were used to ensure that the major topics of interest were covered. This

approach was used in order to make the interview seem like more of a conversation

than an actual interview with the objective of making the participant feel as relaxed

55

as possible. In addition participants were probed in order to uncover unanticipated

experiences and perceptions.

3.7.1 Interview Schedule

According to Prescott (2011:17) an interview schedule is a data collection tool similar

to that of a questionnaire. This tool is used where an interview participant is met and

a set of questions is asked that are the same for each participant. An interview

schedule was used in order to collect raw data from the participants that would

answer the objectives and ultimately the aim of this research. This section outlines

the questions that in the interview schedule and the purpose of the questions being

asked.

Aim of Interview Schedule Questions

According to Saldaňa (2011:35) the available time during interviews is usually

limited. The questions asked were open ended, person centred and that explored the

participants’ experiences and viewpoints. In addition, the questions asked during the

interview were designed to achieve the primary and secondary objectives of the

study (See research agenda in Appendix C). Some of the questions asked were also

based on the theory explored in the literature review.

Table 3.2: Aim of Interview Schedule Questions QUESTION ASKED AIM RELATION TO

RESEARCH OBJECTIVE 1. What is it like being involved

in the taxi industry? To understand the risks involved in the taxi business and to assess if owners like their type of business.

To identify if there were any benefits or challenges in the taxi industry.

2. What got you involved in this industry and how long have you been operating as a taxi owner.

To determine if taxi owners found this industry lucrative and joined the industry or they are in the industry for additional income and any other reasons.

Additional information

3. What are the challenges in the industry that you currently face?

To determine the challenges that the taxi owners are experiencing in their daily operations of the business.

To understand the challenges that the taxi owners were experiencing.

4. What steps are you taking to solve the challenges?

To determine if taxi owners actively seeks information, methods or best practices to address current challenges faced in their daily operations.

To determine if taxi owners were aware of AFC systems as one of the solutions that could be used and applied to their business.

56

QUESTION ASKED AIM RELATION TO RESEARCH OBJECTIVE

5. As an individual involved in the transport industry do you frequently look out for new ways to operate in your business so that it performs better?

To establish if taxi owners actively seek information not just locally, but also internationally that could be applied to their business. - This question also gives the taxi owner another chance to elaborate on question 4.

To determine if taxi owners were aware of AFC systems as one of the solutions that could be used and applied to their business.

6. Do you like receiving cash as a means of payment or would you like to receive your payment in another form? i.e: coupons, tickets etc and why.

To determine if taxi owners have explored other fare media options and the reasons surrounding their responses.

To determine if taxi owners were aware of other forms of fare media including contactless cards and AFC systems.

7. The cash that you receive do you bank it and why?

To determine if taxi owners form part of the banked community or are deliberately avoiding banking their money for tax related reasons.

Additional information

8. From what I have told you earlier on about Automated fare collection systems, what is your opinion?

To determine the level of understanding of the AFC system and if taxi owners can see this sort of system working for them.

To determine the awareness and knowledge of an AFC system.

9. What do you think the benefits might be to having this sort of technology in your taxi? That is using cards to accept payment as opposed to cash.

To give the taxi owner an opportunity to list the benefits that they have been able to pick up with the AFC system. The benefits should be applicable to commuters, taxi owners and drivers.

To determine the perceptions of the benefits to adopting the AFC system.

10. What is your opinion on what the NDoT is trying to achieve with regards to AFC?

To establish if taxi owners track the progress made by the NDoT in trying to achieve their visions for the transport industry in South Africa.

To determine the views of the taxi owners of the role the NDoT plays in the adoption of AFC

11. Do you think that the support the NDoT is giving to the transport industry in terms of creating an environment to accommodate AFC is a reason for you to make use of this technology?

To establish if taxi owners appreciate the work put in by the NDoT and their reasons surrounding their responses.

To determine the views of the taxi owners of the role the NDoT plays in the adoption of AFC

12. What do you think might stop you from having this sort of technology in your taxi?. That is using cards to accept payment for commuter trips as opposed to cash.

To give the taxi owner an opportunity to list the barriers that they have been able to pick up with the AFC system. The barriers should be applicable to commuters, taxi owners and drivers.

To identify the barriers to the adoption of the AFC system.

13. Having discussed all of this, would you like to have this system in your taxi?

To determine if taxi owners would consider such a system in their vehicles and why.

To determine if the benefits and features of the AFC were favourable enough for the taxi owner to adopt the system.

14. Do you have anything more that you would like to say about this system?

To give the taxi owner an opportunity to provide some recommendations from their perspective on how the AFC system could be improved or if it is acceptable the way it is.

To identify the barriers of the AFC system or industry that would prevent the taxi owner from adopting the AFC system.

57

3.7.2 Interview Procedure

After receiving the first potential participant’s contact details from a taxi driver the

prospective participant was contacted. The purpose of the research was explained to

them and once the participant agreed to an interview, a time, date and place was

negotiated. The negotiated time and location was entirely up to the participant. This

was done to allow the participants to pick a location which they felt comfortable with

and a time that would not make them feel rushed or pressured. A day before the

interview took place the participants were called to confirm that the interview was still

to take place. This approach gave an opportunity to make alternate plans should a

problem arise.

Before the interviews began each participant was requested to sign a consent form

(refer to Appendix A). The purpose of the consent form was to inform the participant

of the purpose of the research, the level of confidentiality that would be applied to the

information provided, to provide the participant with contact detail should the

participant require more information about the research and ultimately, written signed

authorisation to interview the participant.

The AFC and CSC system was then explained to the participant in a basic manner

and as part of the explanation process some pictures were shown to the participants.

Making use of pictures made grasping the concept easier for the participants. The

pictures that were used for descriptive purposes can be found in Appendix B. After

the AFC and CSC system was explained to the participants the interview process

began.

The research data was collected over a period of three weeks from 4th September

through to the 21st September 2012. The interviews were on average between 45 -

50 minutes long. A semi-structured participant centred approach in conducting the

interview was used. The interview questions were open-ended. Probing was used

where responses were inadequate. According to Babbie and Mouton (2001:253-254)

probing is a method used to get the interviewee to further expand on responses that

have been given to get more information on the question that was asked. The

probing approach was useful during the interviews that were conducted. All

58

interviews we conducted in English which according to Neeley (2011) is globally one

of the primary languages used for business. Although the primary language of the

participants was not English the participants could understand the questions and

were able to respond to all the questions asked. Conducting the interviews in English

did not affect the responses from the participants.

Documenting of the interview

Interviews were recorded and transcribed where consent to do so was provided and

notes were taken during the interview as a backup measure should the recording

equipment fail, as recommended by Saldaňa (2011:39). However in some cases

participants were willing to be interviewed, but they did not want the interview to be

recorded. In these instances notes were made during the interview for analysis at a

later stage.

Field notes

Field notes were made after the interviews took place. Notes were made on the

environment, participant and atmosphere of where the interviews took place.

Transcription of the interview

All recorded interviews were transcribed. Saldaňa (2011:44) suggests that if the

researcher were to transcribe his/her own interviews it will provide him/her with

insight into the data. This was a long monotonous process but the transcription of the

data added value to the research.

3.8 Data Analysis The data collected in this study was analysed using Creswell's (2009:185) six steps

for data analysis which are depicted below.

59

Figure 3.1: Creswell's Data Analysis in Qualitative Research

Source: Creswell (2009:185)

Step 1: Raw Data Collection and Transcription

This step involved collecting and sorting out all of the data collected during the

interview process. The raw data collected included the transcribed recordings of the

interviews, the notes made during each interview and the field notes that were made

after each interview.

Raw Data

Organising & Preparing Data for Analysis

Reading Through All Data

Coding the Data

Themes Description

Interrelating Themes

Interpreting the Meaning of Themes

Validating the Accuracy of the Information

6

5

4

3

2

1

Step 2: Read Through all Data

All of the material were read to get a sense of the messages that the participants

were trying to convey. This step was performed more than once in order to pick up

and pieces of information that may have been missed. Time was taken to identify

current challenges faced in the taxi industry and the perceptions of the participants

both positive and negative and the reasons on how they had come to their

conclusions about the AFC system.

Step 3: Coding of Data

The data was then coded, which finally lead to the true meaning of the information.

As part of the coding process all of the transcriptions were read from the recorded

interviews and notes from which similar topics were then clustered together.

According to Saldaňa (2012:3) in qualitative research, coding is the process of

identifying and marking segments of data with a short phrase or word. Inductive

coding was used and key participant responses were coded that were given and

then placed these codes into categories. According to Thomas (2003:1) inductive

coding is a method of coding where codes are created from raw data. This method

was used in order to condense the extensive data that was collected and to establish

links that addressed the aim and objectives of this research.

The topics were then given codes which were later categorised.

Step 4: Grouping of Codes into Categories

The identified codes were grouped into categories which fell under the following

headings

Table 3.3: Code Categories CATEGORY RELATION TO RESEARCH

Biographical Information Additional information

Key Industry Challenges Identification of industry challenges

Awareness of AFC To determine the awareness and knowledge of the AFC system

61

CATEGORY RELATION TO RESEARCH

The NDoT and its support for AFC To ascertain the views of the role of the NDoT in encouraging the adoption of AFC systems.

Perceived Benefits of the AFC system from the taxi owner’s perspective

To identify the perceived benefits to adopting the AFC system

Perceived Barriers of the AFC system from the taxi owner’s perspective

To identify the perceived barriers to adopting the AFC system

Intention/decision regarding AFC adoption. To determine the factors that influenced the taxi owner in making their decision to adopt or reject the AFC system.

Step 5: Creation of Sub-Categories

The identified categories were further evaluated and it was discovered that sub

categories were needed to better report the data in a structured manner. For this

process axial coding were used where relationships amongst concepts as defined by

Bernard and Ryan (2010:270) were explored.

From the identified sub-categories themes were identified and reported on

accordingly.

Step 6: Final Interpretation

In interpreting the findings, the findings were discussed under the identified

categories and sub-categories. Recommendations for the AFC system which were

based on the collected information were then provided.

3.9 Pilot Study According to Simon (2011), a pilot study is a small scale or trial run of a bigger

researcher or major study. Simon (2011) suggests that a pilot study does not

guarantee success in the main study, but it does however significantly increase the

chances of success. For this research a pilot study was conducted in order to

increase the chances of success.

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Table: 3.4: Aspects of the pilot study addressed

ASPECT HOW IT WAS ADDRESSED IN THIS STUDY Literature review An initial literature review was conducted and presented to a

product manager of contactless smart cards at an issuing bank as well as two supervisors at the University of Johannesburg for review.

Expert opinion The methodology of this research was presented to a product manager of contactless smart cards at a card issuing bank. Feedback on the recommended research approach was received and the necessary adjustments were made to include snowball sampling as well as in-depth interviews.

Feasibility consideration • Goals and

objectives • Resources • Population • Procedures • Data gathering • Possible errors

In order to ensure that the study was executable the various aspects required for feasibility consideration were carefully considered. Additional consultation was sought form the product manager from the issuing bank to further mitigate the possibility of possible errors.

Measurement instrument A pilot in-depth interview was conducted with a taxi owner in the City of Tshwane

Source: Aspects from Strydom (2005:206-209)

3.10 Trustworthiness

Wimmer and Dominick (2003:159) define validity as the degree to which an

instrument measures what it is set out to measure. The approach used to ensure

validity, reliability and trustworthiness of the research stemmed from Guba's model of

trustworthiness for qualitative research as described by Krefting (1991:215). Krefting

(1991:215) suggests that Guba's model of trustworthiness is based on four key

aspects which consist of Truth Value, Applicability, Consistency, and Neutrality.

The Truth Value

The truth value relates to the level of confidence with the findings of the research.

After analysing the collected data the findings had to be tested and verified by

presenting the findings to a participant of the research who is familiar with the

phenomenon being studied who must agree with the findings (Krefting, 1991:215).

Member checking was also done. In order to further determine the accuracy of the

research the final report were taken back to two participants who confirmed and

verified the findings.

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Applicability

The collected data should have the ability to be applied to other groups. In other

words, it should have the ability to generalise the findings to other populations who

fall within the target population of the research (Krefting, 1991:216).

Consistency

This relates to the level of consistency of the data. The data collected should be able

to be consistent with the data collected from the same participants if the inquiry was

to be replicated (Krefting, 1991:216). Being able to code the data into similar groups,

it seems that the data collected will be similar if the research was replicated.

Neutrality

This relates to removal of bias in the research procedures and results. The main

criteria for a research to be considered as neutral is that the research should be

collected and represented in an objective manner free from bias (Krefting,

1991:217).

In order to meet the four key aspects of Guba's model of trustworthiness (Krefting,

1991:215), the following strategies in ensuring the internal validity of the research

was used:

• Data Triangulation: Data was not collected through use of a single source

multiple sources which included in depth face to face interviews, note taking

during the interview, making field notes after the interview, coding, creation of

categories as well as transcription analysis were used.

• Peer examination: A Doctoral lecturer and Doctoral student and lecturer in the

Marketing Department at the University of Johannesburg served as peer

examiners.

• Clarification of researcher bias: Limited research bias is present in this study as

there is not direct involvement in this industry.

• External auditor: The entire research project was also submitted to an external

auditor who was not familiar with the project provided an objective assessment of

the research.

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3.11 Ethical Concerns

According to Saldaňa (2011:24), researched cannot proceed with any action

necessary to achieve their research goals. Researchers must be ethical in their

research practices as there are moral and legal codes in place that addresses the

ethical treatment of the participants involved (Saldaňa, 2011:24). Wimmer and

Dominick (2003: 66) suggest that researchers must ensure that the rights of the

participants are not violated.

For this research, all measures to ensure that the research was ethical and all

participants involved in the research were comfortable to participate were taken. All

participants signed a consent form presented to them before the interview took

place. Where the participants were not comfortable to participate in the recording of

the interview, but still participate in the research, this was accomodated. All

participants of the research also remained anonymous.

The proposed research was also submitted to the Department of Marketing

Management’s Ethics Committee for approval.

3.12 Conclusion

This chapter described in detail the research design that was used to collect the

relevant data as well as how the collected data was analysed. A qualitative approach

was used for this research and data was collected through in-depth interviews where

the interview for analysis were recorded and documented. The collected data was

analysed by utilising Creswell’s steps for data analysis which involved coding the

data and placing the coded data into categories.

Chapter four of this research presents the results of the analysed data.

65

CHAPTER 4

RESULTS

4.1 Introduction

This chapter presents the results of the research undertaken in this study. The

findings are presented around specific themes that address each of the research

objectives and research questions which aims to determine the view of selected

South African taxi owners regarding adopting an Automated Fare Collection (AFC)

system in the South Africa taxi industry. The chapter has been divided into four

sections.

In the first section outlines the biographic data of the sample population. The second

section highlights the levels of awareness and knowledge of South African taxi

owners of an AFC system. The third section presents the findings relating to the taxi

owners’ perceptions of the benefits, barriers and challenges associated with

adopting an AFC system. The fourth section provides insight into how South African

taxi owners see the role of the NDoT in adopting an AFC system.

4.2 South African Taxi Owners Interview Results

The approach used in analysing the research results from the in-depth interview

conducted is done with the use of the approach outlined by Cresswell (2009:185).

This approach was discussed in Chapter 3. The research results are presented in

accordance with the research objective it addresses which is outlined below.

66

Table 4.1: Research Objectives and Associated Themes Objective 1: To determine the levels of awareness and knowledge of an AFC system among selected South African taxi owners

Theme: Understanding/awareness of AFC system

Objective 2: To determine the perceptions of the benefits, barriers and industry challenges to adopting an AFC system of selected South African taxi owners

Theme: Taxi Owner Benefits

Theme: Commuter Benefits

Theme: Taxi Driver Benefits

Theme: Taxi Owner Barriers

Theme: Commuter Barriers

Theme: Taxi Driver Barriers

Theme: Owners Intended Decision Regarding the AFC System

Objective 3: To determine the views of selected South African taxi owners of the role of the NDoT in adopting an AFC system

Theme: NDoT Support for AFC

4.3 Biographical Information

Table 4.2 outlines the biographical information of the 20 taxi owners interviewed in

the study followed by a brief discussion.

Table 4.2: Biographical Information (n=20)

Taxi Owner Gender Distribution

Male = 10% Female =90%

Racial Classification

African = 85% Coloured = 15% Indian =0% White = 0% Other = 0%

Age Group

Under 25yrs = 0% 25 – 34yrs = 0% 35 – 44yrs= 60% 45 – 54yrs = 30% 55+yrs = 10%

67

Language Preference

Afrikaans = 15% English = 0% Nguni = 15% Sotho = 70% Venda = 0%

Highest Level of Education

Less than grade 12 = 35% Grade 12 = 55% Tertiary = 10%

Number of Taxies Owned

2- 3 Taxies = 65% 4 – 6 Taxies = 20% 6+ Taxies = 15%

Number of Years in Operation

0 – 5yrs = 10% 6 – 10yrs = 65% 11-15yrs = 15% 15+yrs = 10%

Distance of Routes Travelled

10 - 20km + 60% 21 – 50km = 40% 51 – 100km = 0% 100+ = 0%

Owner Drives Taxi

Yes = 25% No =75%

Gender Distribution

From the participants that were interviewed only 10% (n=2) were women. This

industry still seems to be male dominated, but this data is an indication that women

are starting to enter the industry.

Racial Classification

The majority of the participants interviewed were African and only 15% (n=3) were

coloured. The high level of African participants could be attributable to their

geographic location as well as for historical reasons since there was a demand for

transport among the African population mainly due to political segregation as

described by Sekhonyane and Dugard (2004:14). According to Drabile (2012) white

taxi owners are basically non-existent in the short trip taxi industry and have rather

opted to transport school children or factory/company workers on a monthly payment

contract basis to and from work.

The majority of the participants fell within the age group of 35 – 44 years (n=12). This

number then starts to reduce in the age group 45 - 54 years (n=6) and then there is

further reduction in the 55+ years age group (n=2).

68

Age

From the data it seems that individuals become taxi owners between the ages of 35

– 44 years and remain in the industry till they are around 55 years old. The

participants indicated that once taxi owners reach the group of 45 – 54 years old

they start to exit the taxi industry mainly due to the stresses of the industry and also

to pursue other business ventures. As a way to exit the industry with some money in

their pocket, these individuals then participate in the recapitalisation programme

initiated by the NDoT in 2005 and then make use of the R50 000 received in

exchange for their old taxi and invest the money received into other forms of

business.

Prior to the age of 35 years old, individuals could possibly still be saving the required

money to purchase a taxi and are either employed by an organisation or are in

another line of business. This information does not indicate that the older age taxi

owners (55+years) pass on their taxis to their younger members of their family.

Language

Language preference of the participants were more inclined towards Sotho which

was at 70% (n=14). The Sotho language consists of Sepedi, SeSotho, Tshwana. The

participants in this study were adequately literate in English and they were able to

understand and communicate. The language preference of the participants is mainly

due to the geographic characteristics of the population. Most of the people in the

area speak Sotho. The participants that spoke Nguni (n=3) are not originally from

this area indicated that they understood Sotho. The participants that were coloured

spoke Afrikaans as a first language.

Education

There were only a small number of participants that had a tertiary education (n=2).

This could be an indication that education was not a priority for the participants, but

rather making a living and supporting their family. The participants that were in

possession of a tertiary qualification were also only females and both of the

participants (n=2) were involved in the taxi industry for additional income. According

to Dickerson and Gentry (1983:226) one of the characteristics of early adaptors is a

high level of education which would contribute to a greater understanding of the AFC

69

system and therefore accelerate the rate of adoption. This information suggests that

the majority of the taxi owners would probably take longer to adopt the AFC system

as the supplier of this technology would have to educate the target market. The two

females who were more educated would possibly adopt this innovation more quickly

Number of Taxies Owned

The average numbers of taxis owned by the participants were between 2-3 taxis

(n=13). Participants indicated that it would not be wise for them to operate only one

taxi for the following reasons:

• high insurance costs for their vehicles;

• vehicle repayment cost; and

• general housing expense for their day to day living.

If a taxi was to break down and there was no income being generated, the taxi

owners would not be able to cover all of the above mentioned expenses. Meeting

their expenses is top priority as they could lose their income generating assets

through bank repossession or through a fatal accident where the vehicle is written

off.

Number of Years in Operation

The majority of the participants operated for between 6 - 10 years in the taxi industry

(n=13). As the years start to extend past 11 - 15 years taxi owners start to exit the

industry. This information ties in with the age group indicated and further confirming

that taxi owners are in this industry for around 10 years before they start to consider

exiting and exploring other forms of business. There is however still a small

percentage of taxi owners that have been in the industry for over 15 years.

Distance travelled

The majority of the participants operate in the CBD area of the City of Tshwane,

Attridgeville, Shoshanguve, Mamelodi and the Menlyn area. These areas are mainly

short distances and therefore the majority of the participants fall in the distance

between 10 – 20km (n=12). The participants that fell within the distance group of

between 21 – 50km travel between Soshanguve and Tshwane CBD (n=8).

70

Owner-Driver

The majority of the participants indicated that they did not drive their taxis. The

participants that drive their taxis do this where there is an emergency (driver is sick),

or to get a feel of how much their drivers are supposed to be bringing in (n=5),

particularly when fare adjustments are made in response to increasing costs e.g.

petrol increases. The participants who drive their taxi are able to recalculate how

much revenue their drivers are supposed to bring back with the new price

adjustment. The participants that don’t drive their taxis rely on their fellow taxi

owners to decide on a new rate that their drivers should bring in. This data suggests

that taxi owners are unable to arithmetically calculate their costs.

From the biographical information it seems as if the taxi industry is male dominated

and on average taxi operators are in the age group between 35-44yes old with the

majority having grade 12 education as their highest level of education. The levels of

education that the participants had could have a negative influence on the adoption

of the AFC system as indicated by Dickerson and Gentry (1983:226). A total of 75%

of the participants indicated that they also did not drive their taxis. This could be in

an effort to maintain a level of higher status than that of the taxi driver. Drabile (2012)

suggests that taxi owners are not considered to have high status jobs and if this is

placed into the context of the characteristics of early adopters taxi owners may not

adopt this innovation.

4.4 Research Results of Research Objective 1


among selected South African taxi owners

71

Table 4.3: The Understanding and Awareness of an AFC system among SA Taxi Owners

Theme: Understanding/awareness of AFC system

Responses Context

P1: Yes Made reference to the GTS



P4: Yes Made reference to the GTS and OS





P9: Yes Made reference to the CTS and OS

P10:Yes Made reference to the GTS



P13: No No reference made / no understanding








Legend

GTS = Gautrain System

OS = Oyster System (AFC system available in the United Kingdom)

72

Discussion

A total of 70% of the participants understood what an AFC system was and gave the

example of the Gautrain system. A total of 55% of the participants made reference to

the AFC systems in the United Kingdom further indicating that they were aware of

what an AFC system was. What was interesting was that none of the participants

made mention of the operational AFC system being used in the City of Cape Town

on the MyCiTi busses. The participants were also not clear on how the AFC system

functioned. An explanation of how the AFC system worked were provided and

participants were then able to clarify any issues that they did not understand. In

order to facilitate and aid the process illustrations were also used (refer to Appendix

B). Some of the participants could immediately identify some benefits and barriers

that would affect adoption of the AFC. Under instruction from a taxi association

chairperson, eleven (11) potential participants were not allowed to be interviewed.

When probed about this the chairperson was of the opinion that information would be

relayed to the government who would then use the information to plot something that

is not in favour of the taxi industry. This is an indication of the lack of trust and faith in

the South African government.



to adopting an AFC system of selected South African taxi owners

Perceived benefits of an AFC system

The benefits associated with the adoption of an AFC system as perceived by the

Taxi owners include benefits for the taxi owners themselves, the commuters, and the

taxi drivers and presented accordingly.

73

Table 4.4: The Perceptions of SA Taxi Owners of the Benefits for Them to Adopting an AFC system

Theme: Taxi Owner Benefits

Responses Context

P1: CM , FC Participant was able to identify benefits

P2: CM, S, FC Participant was able to identify benefits

P3: S, FC, TR Participant was able to identify benefits

P4: S,TR, FC Participant was able to identify benefits

P5: CM, S, FC, TR Participant was able to identify benefits

P6: CM,BI,FC Participant was able to identify benefits

P7: S, CM,FM,BI Participant was able to identify benefits

P8: CM,FC,BI, Participant was able to identify benefits

P9: S,FC,CM,BI Participant was able to identify benefits

P10:FC,CM,S,BI Participant was able to identify benefits

P11: CM, S, TR Participant was able to identify benefits

P12: FC,S,TR,BI Participant was able to identify benefits

P13: S Participant identified minimal benefit

P14: FC, S Participant identified minimal benefit

P15: CM,FM,TR,S Participant was able to identify benefits

P16: FM,S,CM,BI Participant was able to identify benefits

P17: CM,S, FC Participant was able to identify benefits

P18: S, Participant identified minimal benefit

P19: BI Participant identified minimal benefit

P20: FM,S Participant identified minimal benefit

Legend:

CM = Cash management

FC = Fare Collection

S = Security

74

TR = Transaction Records

BI = Business Improvement

Discussion

Perceived Benefits: Taxi Owner

Taxi owners identified that the AFC system would help them with their cash

management and collection of fares. The fact that the collected funds are directly

deposited into their bank account increases their security as they are not exposed to

robberies at their homes or exposure to possible cash loss if their homes were to

burn down. Another benefit identified was that taxi owners would have transaction

records and also get a better idea of how many commuters pass through their taxis

on a regular basis. This information could also help them with route planning.

Currently they are unable to do any of the above mentioned functions efficiently and

introducing the AFC system could improve their business management. The taxi

owners also did not seem to mind the associated costs of the AFC system and felt

that it was a fair price to pay for the services provided by the system. A participant

said: “The monthly and transaction fees are fine, If the money in the end goes

directly to my account I will be happy” Most of the identified benefits highlighted by

the taxi owners are in line with the benefits that were identified by the TCC fare

collection Study (2000:28).

Table 4.5: The Perceptions of SA Taxi Owners of the Benefits for Commuters to Adopting an AFC system


Responses Context

P1: CFS,NC,C Participant identified perceived benefits

P2: C, NC, CFS Participant identified perceived benefits

P3: CFS, NC ,C Participant identified perceived benefits

P4: NC Participant identified minimal perceived benefits

P5: C, NC Participant identified minimal perceived benefits

P6: NC, C Participant identified minimal perceived benefits

75


Responses Context

P7: CFS, NC, ETU Participant identified perceived benefits and mentioned the solution was easy to use


P9: NC,CFS Participant identified minimal perceived benefits

P10:C, NC,CFS Participant identified perceived benefits


P12: NC, CFS Participant identified minimal perceived benefits

P13: C, Participant identified minimal perceived benefits


P15: ETU, C Participant identified perceived benefits and mentioned the solution was easy to use

P16: C, ETU,NC Participant identified perceived benefits and mentioned the solution was easy to use

P17: C, NC, CFS Participant identified perceived benefits

P18: C Participant identified minimal perceived benefits



Legend

NC = No Need to Carry Cash

CFS = Commuters Feel Safe

C = Convenient

ETU = Easy to Use

Discussion

Perceived Benefits: Commuter

The commuter benefits identified by the taxi owners included the fact that commuters

would no longer have to carry cash. This would be beneficial to commuters that

came from the more dangerous and unsafe areas. In addition the fact that this

76

system was interoperable and could be used to pay for all forms of transport

provided the commuter with additional convenience.

Table 4.6: The Perceptions of SA Taxi Owners of the Benefits for Taxi Drivers to Adopting an AFC system

Theme: Taxi Driver Benefits

Responses Context

P1: NB Participant could not identify any benefit for the taxi driver






P7: NCC Participant was able to identify only one benefit



P10:NB Participant could not identify any benefit for the taxi driver







P17: NCC Participant was able to identify only one benefit



P20: NB Participant could not identify the benefit for the taxi driver

77

Legend

NB = No Benefit

NCC = No Need to Count Change

Discussion

Perceived Benefits: Taxi Driver

Taxi owners could not find any real benefit to the taxi driver. The AFC system was

seen as more of a mitigating solution for some of the drivers’ misdemeanours. This

could affect taxi owner’s decision to adopt of the AFC system because if drivers don’t

agree with the system they could sabotage the system leading to more loses than

what taxi owners may find acceptable. 10% of the participants could only identify one

benefit for the driver and that was the removal of the task of counting and giving

change back to the commuter after they had paid for their fare with a large note.

Drivers currently shift this task to the commuter who sits in the front with him.

Perceived barriers to the adoption of an AFC system

The barriers to the adoption of an AFC system perceived by the Taxi owners include

barriers for the taxi owners themselves, the commuters, and the taxi drivers and

presented accordingly.

Table 4.7: The Perceptions of SA Taxi Owners of the Barriers for them to Adopting an AFC system


Responses Context

P1: CGE, RA A possible hindrances to the adoption of the AFC

P2: DR, CGE, ETT A possible hindrances to the adoption of the AFC

P3: RA, CGE, ETT A possible hindrances to the adoption of the AFC

P4: DR, RA, ETT A possible hindrances to the adoption of the AFC

P5: DR, CGE A possible hindrances to the adoption of the AFC

P6: ETT, DR, CGE A possible hindrances to the adoption of the AFC

P7: CGE, RA, DR A possible hindrances to the adoption of the AFC

78


Responses Context

P8: ETT, CGE A possible hindrances to the adoption of the AFC

P9: DR, CGE A possible hindrances to the adoption of the AFC

P10: DR, RA A possible hindrances to the adoption of the AFC

P11: RA,CGE A possible hindrances to the adoption of the AFC

P12: ETT, CGE, DR A possible hindrances to the adoption of the AFC

P13: DR There was a strong focus on resistance from the driver

P14: RA There was a strong focus on speed of which commuters would adopt the AFC technology

P15: RA, DR A possible hindrances to the adoption of the AFC

P16: CGE, ETT A possible hindrances to the adoption of the AFC

P17: DR,RA A possible hindrances to the adoption of the AFC

P18: RA There was a strong focus on speed of which commuters would adopt the AFC technology

P19: CGE There was a strong focus on speed of which commuters would adopt the AFC technology. This would make the system expensive with limited transactions taking place

P20: CGE Participant was concerned about the costs of the solution

Legend

CGE = Costs Could Get Expensive

RA = Rate of Adoption for Commuters

ETT = Exposure to Tax

DR = Drivers may Have Difficulty Understanding AFC

Discussion

Perceived Barriers: Taxi Owner

Although the costs associated with the AFC system were acceptable, taxi owners

were concerned with the rate of adoption of the innovation by the drivers and

commuters. Some of the associated fixed costs like terminal rental and internet fees

would be on-going even during the introductory phase. Should the rate of adoption

be slow these fixed costs will unfortunately lower taxi owners’ profits during this

79

period. Taxi owners are not willing to incur this additional expenditure. In the event

that the AFC system becomes successful taxi owners will be exposed to additional

tax payments as their transactions will be running through their business bank

account. Although taxi owners do declare tax, they don’t declare the true value of

their income. If all of their income was declared, the taxi owners feel that the net

income received after their taxes have been paid would be less than what they are

currently receiving.

Taxi owners also feel that the promotion of the AFC system will be their responsibility

and promoting and marketing is not part of the business that they are in. Currently

taxi owners relay messages that they would like commuters to know via their taxi

drivers. This includes route changes and price increases. In promoting the CSC, taxi

owners would rely on taxi drivers to inform and educate the commuters about the

AFC system and how to use the CSC. This could be difficult for taxi drivers, because

they may also have some difficulty in understanding the AFC system themselves.

This would have the following negative impacts for the taxi owner:

• disruption of business;

• incorrect and incomplete information given to commuters; and

• owners would have to have a dispute resolution process in place should the card

malfunction or deduct money twice. This does not occur when cash is utilised.

The price is fixed and the commuter receives their change with no issues.

Although the AFC system may provide taxi owners with better administrative control,

it could disrupt normal business operations especially in the introductory phase. The

taxi owners would have to evaluate the benefits and barriers of adoption in order to

determine if the benefits outweigh the costs.

Table 4.8: The Perceptions of SA Taxi Owners of the Barriers for Commuters to Adopting an AFC system


Responses Context

P1: LF,LC,ITCO Perceived commuter barrier identified by participant

80


Responses Context

P2: LF, LC, ARC Perceived commuter barrier identified by participant

P3: LF,ITCO Perceived commuter barrier identified by participant

P4: LC, LF, ITCO,ARC Perceived commuter barrier identified by participant

P5: LC,LF,ARC Perceived commuter barrier identified by participant

P6: LF,ITCO Perceived commuter barrier identified by participant

P7: LF, LC, ITCO Perceived commuter barrier identified by participant


P9: LC, ITCO Perceived commuter barrier identified by participant

P10: LC, ARC Perceived commuter barrier identified by participant

P11: LF, LC Perceived commuter barrier identified by participant

P12: LF, LC, ITCO Perceived commuter barrier identified by participant

P13: LF,LC Perceived commuter barrier identified by participant

P14: LF, ARC Perceived commuter barrier identified by participant

P15: ITCO,LC Perceived commuter barrier identified by participant


P17: LC,ITCO, ARC Perceived commuter barrier identified by participant

P18: LF Perceived commuter barrier identified by participant

P19: LF Perceived commuter barrier identified by participant

P20: LF, ARC Perceived commuter barrier identified by participant

Legend

LF = Load Fee

LC = Load Channels

ITCO = Inability to Cash Out

ARC = Access to Replacement Cards

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Discussion

Perceived Barriers: Commuter

Load Fee

Taxi owners seem to think that the commuter will have trouble seeing any real

benefit from the CSC as their true value of money will be diminished by the 2.5%

load fee. This will be a major hindrance on commuter uptake. Taxi owners feel that

the majority of commuters that make use of taxis belong to the lower end of the

market and a sum as little as R0.50 means something to them. The collective charge

of 2.5% every time a commuter loads their card could amount to a trip to a specific

location depending on the amount being loaded. Furthermore a large majority of

commuters also don’t have bank accounts. This suggests that they have never made

use of a banking product before and it may be difficult for them to understand how to

load money onto the card and how this money is paid out to the taxi owner.

Commuters could potentially fear the technology due to its complexity.

Load channels

Another issue mentioned by taxi owners was the available load channels, which are:

• ATMs;

• bank branches;

• internet banking; and

• merchant loads.

The majority of these channels would be suitable for individuals that have easy

access to the internet and ATM’s that are located in close proximity to where they

stay. For the common commuter, the available load channels could be an

inconvenience as these channels are in most cases not easily accessible. It requires

the commuter to get to a specific location to fund their cards, which means that they

would potentially need to catch a taxi to get there. The majority of the common

commuters also do not have access to internet banking and this load channel

therefore has no value to them. A participantsaid: “we don’t have many ATM’s in

Attridgeville and they are mostly only at the shopping centre. As for the internet! Ahh

no, that won’t work”.

82

Inability to cash out

Taxi owners questioned the inability of the commuter to withdraw cash out of the

card. There could be instances where the commuter has loaded money onto the

card and there is a family emergency and cash is required urgently. Also where there

are taxi strikes and the commuter would like to make use of an alternate mode of

transport that does not accommodate AFC. In this instance they will not have access

to their money. The value proposition in these contexts does not seem strong

enough for the commuter.

Access to replacement cards

The participants also indicated that cash is easily accessible and readily available. If

the commuter were to lose their card, a replacement card would not be readily

available and the cost of the replacement card is very high. This will further reduce

the value proposition of the AFC system. Commuters would then revert back to cash

until they are able to get a replacement card. This opens up opportunities for drivers

to pocket the money and not hand it over to taxi owners.

The responses given by the taxi owners were in many aspects in line with the

barriers to innovation adoption highlighted by Ram and Sheth (1989:6-7). The usage

barrier relates to the load channels available to the commuter, which in many cases

may not be easily accessible to the average public transport commuter. The value

barrier could relate to the diminished value of the actual value of the money loaded

on to the card, this could mean one less trip for the commuter. The tradition barrier

relates to a combination of variables identified by the taxi owners. This includes the

inability to withdraw money from the card in the case of an emergency. This means

that money is locked up in the card and is not readily available in comparison to

cash.

83

Table 4.9: The Perceptions of SA Taxi Owners of the Barriers for Taxi Drivers to Adopting an AFC system

Theme: Taxi Driver Barriers

Responses Context

P1: NEI Barrier to AFC adoption – Stakeholder rejection



P4: NEI, I Barrier to AFC adoption – Stakeholder rejection

P5: I, NEI Barrier to AFC adoption – Stakeholder rejection


P7: I Barrier to AFC adoption – Stakeholder rejection



P10:NEI, I Barrier to AFC adoption – Stakeholder rejection






P16: I, NEI Barrier to AFC adoption – Stakeholder rejection





Legend

NEI = No Way to Make Extra Income

I = Inconvenience

84

Discussion

Perceived Barriers: Taxi Driver

The taxi owners are of the opinion that the AFC system would disadvantage the

driver the most and that they would resist the system totally. Taxi drivers would have

no way of making their extra income and would therefore look for methods to

outsmart the AFC system. According to the taxi owners this could include disabling

the card reader, accepting cash and then reconnecting the reader. Taxi owners

indicated that some of their taxi drivers currently disconnect the odometer and

reconnect it so that the taxi owner can not determine how many kilometres they have

actually travelled. Due to the assumptions of disconnecting the AFC system and then

reconnecting it at a later stage the taxi owners suggest that incorporating the AFC

system into their taxis could actually lead to more money being stolen that what they

are currently experiencing.

Table 4.10: Intended Decisions Regarding the AFC System


Responses Theory/Context

P1: NRTA, Dr Not yet ready to adopt

P2: NRTA, Dr, CR Not yet ready to adopt

P3: NRTA, LGS Not yet ready to adopt

P4: LGS, WD Would adopt the AFC solution but is influenced by the stakeholders in the industry and lack of government support.

P5: NRTA, CR, DR Not yet ready to adopt

P6: NRTA, CR, DR Not yet ready to adopt

P7: NRTD Not yet ready to adopt

P8: CR,DR Not yet ready to adopt

P9: WD, DR Would adopt the AFC solution but is influenced by the stakeholders in the industry

P10:NRTA Not yet ready to adopt

P11: NRTA Not yet ready to adopt

85



P12: WD, DR, CR Would adopt the AFC solution but is influenced by the stakeholders in the industry

P13: NRTA, LGS, CR Not yet ready to adopt


P15: CR, DR Not yet ready to adopt

P16: WD, DR, CR Would adopt the AFC solution but is influenced by the stakeholders in the industry



P19: NRTA, DR Not yet ready to adopt


Legend

DR = Driver Resistance

CR = Commuter Resistance

LGS = Lack of Government Support

NRTA = Not Ready to Adopt

WD = Would Adopt

Discussion

Taxi Owners Intended Decision Regarding the AFC System

The participants were able to identify the benefits of the AFC system and were

comfortable with the associated costs of the system. The participants however

expressed concern for the two other stakeholders within the taxi industry. These

stakeholders included the commuter and the taxi driver. Participants indicated that

the migration from cash to card may be a bit too radical for the majority of

commuters as cash is what they are used to. Most commuters that make use of

taxies on a daily basis are also at the lower end of the market. The participants

indicated that the load fees attached to the CSC card will be too expensive for the

average commuter.

86

The participants also expressed that through past experience with their drivers, their

drivers will possibly look for loopholes in the AFC system and exploit the identified

loopholes by stealing money from the taxi owners. Participants indicated that this

could lead to more financial loss than what they are currently experiencing as they

will be solely reliant on the AFC system and no more expecting physical cash. The

other aspect of incorporating the AFC system into their taxis is that the system would

expose them to tax. The majority of the participants are currently not paying or are

only making partial payments towards tax in their cash based business. One of the

participants said: “We only declare some of our income and pay tax on that”. A total

of 70% of them indicated that they are not yet ready to adopt the solution.

Key Industry Challenges

The key industry challenges that were mentioned by the owners included:

• exploitation of loopholes identified by drivers in the business;

• financial challenges;

• replacement of drivers; and

• a lack of government support.

Each of these issues is discussed in more detail below.

Exploitation of Loopholes Identified by Drivers:

Taxi owners see their drivers as extremely opportunistic since they look for every

available opportunity to steal from their owners. All of the participants mentioned this,

but they have accepted it as part of their business. One of the participants mentioned

"we just have to manage how much they steal from us".

In addition the taxi owners stated that the majority of the drivers are of the opinion

that they are smarter than their employers. Drivers will study the taxi owner’s

movement patterns. When taxi owners are not available to check on taxi drivers or

assist them when a problem arises, for example when a taxi breaks down, taxi

drivers use this as an excuse for not having made enough money. One of the

participants said "my driver sometimes gives me a call to ask to see me and if I can't

see him immediately or within 2 hours, he kind of knows I am not around".

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In instances where a ticketing system was introduced to monitor and counter check

the money that was made during the course of the day, taxi drivers would then

partner with rank marshals to manipulate business performance for the day. Seven

(7) participants mentioned this, which may indicate that they did not see any benefit

from using a ticketing system.

In some instances where taxi owners have a large fleet of taxis, taxi drivers collude

with each other to steal one or two taxis from the taxi owners. These drivers then

move to another town or province and become taxi owners themselves. For example

one participant mentioned "last year one of my taxis was stolen from a new driver I

just employed and the vehicle was recovered in Limpopo". Taxi drivers do not only

collude to steal taxis from their employers, but they also steal some of the day’s

takings over a period of time. They are then able to purchase their own taxi to

become an owner. Six (6) participants made mention of this.

Financial Challenges

Taxi owners have seen and tried to make use of ticket based systems, but these

systems are only useful for longer distances. The level of administration and

practicality of ticket based systems is not suitable for the shorter distances mainly as

commuters board and exit the taxi at any point. This opens opportunities for fraud

whereby drivers and rank marshals at the taxi rank state that they sold fewer tickets

than they actually did. Taxi owners have no way of cross checking with drivers or

rank marshals and this has led to owners only accepting cash from commuters. This

could also be said of cash based systems. In the taxi industry taxi drivers tend to

pocket the money that they make from commuters who enter the taxi along its route.

All of the taxi owners indicated that they were aware of their drivers stealing some of

their money and the majority indicated that around 30-35% of their potential income

was not handed over to them. Through discussion with their fellow taxi owners it was

collectively concluded that the most effective way of tackling this issue was to

enforce a rule on their drivers that they must bring in a daily fixed amount and

anything made over and above the required fixed amount could be kept by the

drivers.

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Where there are increases in the petrol prices some taxi owners actually drive their

own taxis to determine how much money can be made in a day with the new rate

and then they determine the new rate the drivers need to bring back to the owners

and the difference is kept by the driver. On days where the drivers are not able to

meet their target, they are to use their profits from other more successful days to

make up the short fall. Taxi drivers that perpetually default on the required amount

are fired and replaced with new drivers. One of the participants said: “If they don’t

bring me my money regularly I simply fire them”.

According to the TCC Fare collection Study (2000:28) better financial control,

improved management of information and fraud reduction would be some of the

operational advantages that would be achieved with the use of an AFC system.

According to the participants, taxi owners are experiencing operational challenges

and financial loss of between 30-35% of revenue and it seems as if no solution has

yet been found to reduce the fraud and theft.

Replacement of Drivers

Driver turnover in the taxi industry seems to be high due to various reasons such as:

• theft of vehicles from owners;

• failure to bring in the required daily amount;

• reckless driving by drivers which has led to them being arrested; and

• some owners use drivers who don’t have valid driving licenses. These drivers are

sometimes caught and arrested and have to be replaced.

Driver replacement in the industry seems to be a challenge as the number of

reliable, trustworthy drivers is minimal. Taxi owners have to carefully assess drivers

as they hire them as a new trend has emerged. Where drivers are fired/replaced

they notify unemployed drivers that a particular owner is looking for a new driver.

They then give drivers all the information about the taxi owner such as, how much

the owner will expect them to generate on a daily basis, their management

weaknesses and the various other opportunities where the driver can use to steal

from the owner. In extreme cases, disgruntled drivers plan to steal taxis from the

owner with the newly hired driver.

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Taxi owners have to spend some of their time physically driving their own taxis when

they are unable to find a suitable driver. They have to do this because if their

allocated route is not serviced by their vehicles another taxi owner could take their

route and it could be difficult for them to get the route back unless their taxi

association intervenes. An owner driving their own taxis does not seem to be a

regular practice among taxi owners as seen in Table 4.2 only 25% of the participants

interviewed drive their own taxis. A participant said: “I never drive my own taxi

because my other drivers will not take me seriously, I always find someone else to

drive”.

Lack of Government Support

The participants’ opinion of government was very negative. A total of 70% of the taxi

owners did not want to be interviewed for fear that they may be pinpointed by fellow

taxi owners as supplying the government with information. This topic seemed to be

very sensitive to the majority of the participants. The participants did however

indicate that in 2005 the NDoT initiated a recapitalisation programme where taxi

owners were asked to surrender their own taxis for scrapping and they would get

new replacements supplied by the government. However this was not what

happened. A participant indicated that at the time this was the message that was

conveyed to them. Instead taxi owners were asked to scrap their old taxis and when

they did so they would receive a payout of R50 000 towards a new taxi. The amount

that was given back is insufficient for the taxi owner to purchase a new taxi "the price

of a new Sesfikile Toyota Taxi is around R300 000". As a result some taxi owners

would rather make use of their old taxis until they could no longer function while

others saw this as an opportunity to swiftly exit the industry. Those who exited then

took the R50 000 per taxi and went into other forms of business.

Although taxi owners feel that the introduction of various forms of transport is a

positive thing for the commuter, for the taxi owner they are a threat to their income

generation and survival. For example the introduction of the Rea Vaya bus service in

Johannesburg, which charges a significantly lower fare price than taxis, has led to

commuters switching to the Bus Rapid Transit (BRT) services. In the City of

Tshwane the local municipality announced that they would also be including BRT

services to its local public transit offerings. Taxi associations within the City of

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Tshwane have already been negotiating with the municipality and it seems as if taxis

may be totally moved out of the city and their licenses purchased.

Taxi owners in Tshwane are concerned about how they will sustain themselves once

the money they have received from the municipality’s purchase of their licences has

been utilised to pay daily living expenses. Taxi owners operating in Tshwane just can

not be allocated to other zones such as Atteridgeville, Mamelodi or Shoshanguve as

these areas are already under the control of other taxi associations and there is no

room to absorb any more taxis (Drabile, 2012). Taxi owners perceive that the

government is trying to get rid of them meanwhile they believe that they are

providing their communities with a valuable service.



NDoT in adopting an AFC system

Table 4.11: The Views of Selected SA Taxi Owners of the Role of the NDoT in Adopting an AFC System

NDoT Support for AFC


P1: NA No influence on the adoption of AFC








P9 NA No influence on the adoption of AFC

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NDoT Support for AFC













Legend

NA = Not Aware

Discussion

All of the taxi owners were not aware of the integrated transport network that the

NDoT has envisioned and this had to be explained to them (n=20). After the

explanation and the taxi owners understood the vision, all the participants indicated

that the NDoT’s vision would have no influence. Even if individual taxi owners

wanted to incorporate the AFC system into their taxis, they could not do so, unless

all members belonging to a particular taxi association agreed to adopt the AFC

system. This goes back to the concept of the systems theory where components are

interdependent of each other in order for the system to function. The NDoT has no

influence on the adoption of the AFC system. The participants have indicated that

drivers and commuters will have significant influence in their adoption of the AFC

system.

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4.7 Conclusion

Taxi owners were able to identify the perceived benefits and barriers from a taxi

owner perspective, a commuter perspective and a driver perspective. Some of the

perceived barriers identified by the taxi owners could result in the rejection of the

AFC system. This is mainly due to the fact that in order for the AFC system to

properly work, the three highlighted stakeholders; taxi owner, commuter and driver

all need to support the system. Although there is support from the NToD towards the

adoption of this innovation none of the participants were aware of this and even if

they were aware of the support from government, they suggested that there would

be no influence in the adoption of the AFC solution. The participants that indicated

that they would be willing to adopt the innovation were still influenced in their final

decision by the perceived barriers they were able to identify from the commuter or

driver perspective.

Although participants were able to see the operational benefits of introducing an AFC

system into their current operations, it was also clear from their responses that there

is heavy influence from the stakeholders within the taxi industry especially from the

drivers. This is a big obstacle in seeing taxi owners moving forward with the decision

to adopt the innovation.

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CHAPTER 5

CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

This chapter concludes the research study by relooking at the objectives of the

research, the limitations of the research finally summarising the outcomes of the

research and providing recommendations for further research.

5.2 Conclusion of Findings Related to Research Objectives The current cash based payment to taxi drivers by commuters facilitates cash theft

and money laundering by taxi drivers. Ndebele (2011) highlighted the points of

opportunity for cash theft and money laundering activities as some of the challenges

of the taxi industry. The introduction of an AFC system may address the issues

associated with a cash based payment system. The NDoT and the Minister of

Transport with his amendments to the land transport act on the 17th of June 2011

support the introduction of the new AFC system. However, for an AFC system to be





adopting such a system. Therefore the focus on this study was to determine:



5.2.1 Research objective 1: Taxi Owners Awareness and Knowledge of an AFC system

In general, the taxi owners were aware of the AFC and a basic understanding of how

it worked was displayed by the majority of the participants. Many references were

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made to the Gautrain card found in South Africa and the Oyster card found in the

United Kingdom. Despite the introduction of AFC systems in South Africa in the bus

transit environment with the MyCiTi bus implementation in the City of Cape Town,

the majority of the taxi owners were not aware of the AFC system in the City of Cape

Town. This could be mainly due to marketing that could have potentially only been

concentrated in the Cape Town area. The lack of knowledge of the AFC bus

implementation in the City of Cape Town is an indication that taxi owners do not

actively seek out information on developments in the transport industry in South

Africa. Taxi owners may have heard of the Gautrain system and the London Oyster

card, but they are more concerned with what is happening in their immediate

environment and how it may affect them.

The taxi industry seems to play a passive role in obtaining information regarding

innovations within their industry which supports statements made by Rogers

(1962:164). Taking the levels of education into consideration, only 10% of the

interviewed participants had tertiary education and this could be a factor for the

passive approach to innovation information seeking. It can be concluded, based on

the findings of this research, that taxi owners have limited understanding and

knowledge of the AFC system, which pose a challenge for the adoption of this

innovation.

5.2.2 Research objective 2: Taxi Owners Perceptions of the Benefits, Barriers and Challenges to Adopting an AFC system

The taxi owners were able to identify benefits to themselves and the commuter

regarding the AFC solution. Benefits to the taxi owner were mainly operational

benefits and benefits to the commuter were mainly focused on security. There were

no real perceived benefits to the driver that could be identified by the taxi owners.

The solution was seen to be more of a threat to taxi drivers by closing the gap for

them to steal from taxi owners. Taxi owners felt that this would potentially lead to

machine sabotage and ultimately greater loss of income to them. This is especially

relevant if taxi owners are completely reliant on the AFC system and have no way of

tracking physical cash collection that the taxi driver may collect.

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Taxi owners indicated that the biggest barrier that they could identify was their

exposure to tax. Formalising the fare collection process and tying the income to their

bank account will expose the taxi owners to tax, which, it seems, they are not willing

to pay. From a commuter perspective the perceived barriers that were identified

were the card load channel options, the cost of the card and the perceived

convenience for using the card to justify the load fee applied to each and every load.

From a driver perspective, taxi owners suggest that the whole system is a barrier to

taxi drivers and they will then be the biggest resistors to the innovation. This is

mainly due to the fact that the system will remove the opportunity for taxi drivers to

steal money from taxi owners.

Key industry challenges as perceived by taxi owners were mainly focused around

limited routes available, which according to the taxi owners is mainly due to the

various forms of public transport that is being introduced by government i.e. buses

and trains. Taxi owners feel as if the government is trying to push them out of the city

centres and suggest that the government is not supporting their industry enough.

Drivers are also a problem for taxi owners. Taxi owners need drivers, but drivers

have a habit of exploiting loopholes in the taxi business and end up stealing money

from the taxi owners. Taxi owners have accepted this issue and replace drivers that

they feel are not delivering.

Being a cash based business does not seem to bother the taxi owners and it actually

seems to fit in well with the type of commuter base they transport and the way taxi

owners pay their taxi drivers. Ndebele (2011) highlighted challenges from a more

holistic perspective and none of the highlighted challenges were mentioned by the

taxi owners except for cash theft within the taxi industry by taxi drivers.

Taxi Owners intended Decision to Adopting the AFC System

From the analysis of the data, it seems as if the taxi owners are not in favour of

adopting an AFC solution. It may however be considered in future. This conclusion is

drawn from the following:

• Exposure to tax, which taxi owners are not willing to pay.

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• Usability of the product. The product may seem like an easy payment instrument

to use but for the older commuter, it may be extremely complicated and

overcoming the tradition barrier may pose to be difficult.

• There is no liquidity in the CSC card. Commuters are used to cash not for only

their transport needs but also for personal reasons. The inability to withdraw cash

out of the product is seen as a serious limitation.

• Taxi owners suggest that the CSC is too expensive for the normal commuter.

• The potential risk of system sabotage by taxi drivers. Taxi drivers are constantly

looking for loop holes in the business to defraud taxi owners. Taxi owners

suggest that if a loophole was discovered in the AFC system they could

potentially lose more money that what they are currently losing.

Although taxi owners were able to identify operational advantages from making use

of the AFC system which were in line with the operational advantages described by

the TCC fare collection Study (2000:28), benefits identified for the commuter were

limited and not convenience related as suggested by Cornelius (2012c). There was

also no real benefit that was identified for the taxi driver.

Ram and Sheth (1989:6-7) had identified five barriers to innovation adoption and

upon further analysis this did not affect only the commuter but it also affected the taxi

driver. The usage barrier had the most impact for the taxi driver as the AFC system

is complexly different from what the drivers are used to using and it would potentially

create a barrier for them to enrich themselves. This is a definite benefit to the taxi

owner from an operational perspective but also a definite barrier to the taxi driver.

Due to past experience taxi owners were convinced that this would cause drivers to

exploit loop holes within the system which would ultimately affect the taxi owners

fare collection as well as revenue. What was initially thought to be a definite benefit

to the taxi owner has turned into a definite barrier.

This goes back to the systems theory where all components that make up the

system need to work in harmony. In this case the taxi owners suggested that not all

stakeholders are receiving value and benefit that is satisfactory from the AFC system

97

and therefore has the potential to reject the innovation which will in turn affect the

whole system. These points also pose a threat for the adoption of the innovation.

5.2.3 Research Objective 3: Taxi Owners Views of the Role of the NDoT in Adopting an AFC System

None of the taxi owners understood the vision of the NDoT’s support for AFC. The

vision of the NDoT had to be explained to all the taxi owners and after explaining and

receiving a response, it was clear that the NDoT would have no influence on taxi

owners on the adoption of the AFC system. Although the NDoT does supports the

industry and is making an effort to elevate the industry to that of first world countries

through amendment to the land transport act on the 17th of June 2011, taxi owners

seem to once again be passive in their information gathering.

Despite the fact that taxi owners openly admitted to not paying taxes on their income

or only partial tax payment on income declared, taxi owners suggest that the

government has shown no interest or support for the taxi industry. The taxi owners

have rather suggested that the government is more in favour of the commuter and

even subsidises the various forms of public transport for the commuter. Taxi owners

suggest that this commuter support that government is providing is hurting their

business rather than adding value or complementing their operations.

From the findings of this research 0% of the participants were aware of the vision

and support the NDoT was providing for AFC. It was almost as if the NDoT did not

exist. There was therefore no influence that came from the NDoT that would

motivate the taxi owners to adopt the AFC system.

5.3 Recommendations

The South African taxi industry is a complex and dynamic industry with many

traditions and characteristics. These traditions and characteristics include the use of

cash by commuters and theft of cash by taxi drivers which taxi owners have come to

accept to a certain degree. Based on the research findings, in order to direct and

convince taxi owners to adopt the AFC solution, the introduction of an AFC system

98

could be done through a geographically phased two-step process. The two step

geographically phased roll out of the AFC system in the taxi industry could first

involve (Step 1) introducing the AFC system and CSC card to the common taxi

commuter within the Cape Town area and then expose the system to a wider

commuter audience. The exposure of the system and the CSC to a wider audience

could form part of Step Two of the geographically phased roll out approach.

Leveraging of AFC Bus Implementations in Key Metropolitan Areas

Within large metropolitan areas where there are bus AFC implementations, taxi

implementations could take place in these regions and leverage off the exposure that

commuters have received with the AFC bus implementations. It is expected that

commuters in large metropolitan areas are more regularly exposed to technological

advancements and can be considered as early adaptors when you compare their

characteristics as suggested by Dickerson and Gentry (1983:226) with commuters

that reside and work in the rural areas of South Africa. AFC taxi implementations

could also be limited to areas where AFC bus operators operate and the two modes

of transports can complement each other. This will be possible, because the CSC is

interoperable and it will work both on the taxi and the bus.

Exposure to a Wider Audience: National Roll Out Approach

As bus AFC implementations occur in other metropolitan cities taxi implementations

could follow and leverage of the exposure commuters receive from utilising the bus

services within those areas. It is expected that initial exposure to the technology will

ease the decision to adopt the technology by taxi owners, commuters and drivers.

During this process the NDoT can get involved and put mechanisms in place to

support the adoption of the AFC, such as financial assistance and workshops to train

and further expose taxi owners to the AFC system. During business planning

sessions the NDoT could invite taxi associations to the sessions. This will ensure

that taxi owners are aware of the direction that the NDoT wants to take in order to

achieve their set goals and this will give taxi owners an opportunity to voice their

recommendations on how the taxi industry should be shaped. If the NDoT were to

take this approach they may start to see themselves having better influence within

the taxi industry.

99

To encourage commuter use of the CSC, banks producing this product could

consider wavering the load fees for cards used in the taxi industry. By wavering the

load fees for taxi commuters the cost to use the card will be more affordable for the

average commuter. The cost of the card will still apply, but it is expected that the

reduced cost of using the card will encourage more commuters to take up the CSC

card. Banks could also ensure that customer education campaigns are done in all of

the official South African languages to ensure that all commuters are able to

understand the CSC and the AFC system as well as the benefits and convenience

that they can enjoy if they are to make use of the CSC card.

In terms of providing a solution that will address the issue of potential sabotage of

the AFC system by taxi drivers, it is suggested that a camera solution inside the taxi

that will give the taxi owner the ability to monitor their drivers be investigated.

5.4 Limitations of Research

This research was limited to only taxi owners that operated in the City of Tshwane

and did not venture out of this region. Only taxi owners that had two taxis or more

were considered for this research because of the higher probability of experiencing

more business challenges. A small sample consisting of only 20 participants was

used

5.5 Recommendations for Future Research

Recommendations for future research are based on the information gained from the

literature review and the research findings and include:

• To duplicate this study in other major metropolitan areas or cities in South Africa

to obtain a more representative view from South African taxi owners regarding

the possible adoption of an AFC system.

• To investigate the views of the other stakeholders in the South African taxi

industry i.e. Taxi associations, commuters and the drivers themselves.

100

• To investigate whether the AFC system and CSC offering is the correct solution

for the South African taxi industry.

• To investigate if the current majority public transport commuter base has access

to internet banking, ATM facilities and other alternative load channels and if these

channels are a convenience to them or if new more convenient channels need to

be developed.

• To investigate the current solutions that are available to taxi owners to monitor

taxi drivers who intend to sabotage the AFC system and the cost implications to

the taxi owners.

5.6 Conclusion

The taxi industry is made up of a number of stakeholders which includes the taxi

owner, the drivers, the commuters and the government. Should all the identified

stakeholders accept the AFC system, there needs to be complete migration from

cash to card payments in order for the taxi owners to realise operational benefits.

Although amendments to the National Land Transport Act 2009 (Act No.5 of 2009)

fully support, and encourage the use of AFC systems in an attempt to improve and

formalise the public transport industry, South African taxi owners have identified their

exposure to tax as a barrier to adoption of such a system, which they are currently

not willing to pay. South African taxi owners also indicated that the available load

channels are not suitable and the cost to use the card is too expensive for the

average commuter. Participants feel that there will be resistance from this

stakeholder (commuter). Furthermore, South African taxi owners also suggested that

the drivers will be the stakeholder that most resists the solution and will in many

instances possibly sabotage the system as their additional revenue stream through

stealing fare money would have been compromised.

The AFC system is a solution that will address many of the taxi owners fare

collection issues, but in order for the solution to work all stakeholders involved need

to be comfortable with the solution. The solution may work well with rail and short

distance bus operators as they can easily dictate how their services will be offered

101

and what fare options they will accept. This is mainly due to the fact that they

operate in controlled zones. In the South African taxi industry this type of control is

quite difficult as taxis travel all over the place and all taxi associations in an area will

have to buy into the idea of an AFC system before it can be successfully

implemented.

The nature of payment options has evolved with the human desire to continuously

innovate by pushing the boundaries of technologies that offer better efficiency and

convenience to individuals and businesses. The taxi South African industry may just

not yet be ready for an AFC system.

102

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Appendix A: Interview Consent Form

Study Title:

Adoption of an Automated Fare Collection System: A Taxi Owner's Perspectives

Researcher:

Peter Muwanula

Purpose of research

The purpose of this research is to understand the perceived perceptions of taxi owners towards automated fare collection systems. The objective is to try to understand whether introducing a card type system for commuters to pay for fares as opposed to receiving cash, can be adopted into the South African taxi industry. This research also serves as one of the requirements from the University of Johannesburg that the researcher needs to complete in order to obtain a Masters of Commerce: Business Management Degree. CONFIDENTIALITY:

You will remain anonymous and no information regarding your name or location will be divulged.

WITHDRAWAL OF PARTICIPATION:

Should you decide at any time during the interview or discussion that you no longer wish to participate, you may withdraw your consent without prejudice.

REQUEST FOR INFORMATION:

You may request for any information regarding this study at any time from the contact detail listed below:

Researcher Peter Muwanula Tel: 011-350-3451 Cell: 072-460-2037 [email protected] SIGNATURE: I confirm that the researcher has verbally explained the purpose, interview procedure and use of the research to me in a manner that I could understand. I fully understand that participation is voluntary and I can withdraw from the interview at any time. I understand that I will remain anonymous and have full access to the research information should I request it from the contact detail provided on this consent form. This research is for the researchers own use and will not be shared with anyone. Participant Signature:

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Appendix B: Pictures Used With Interview Agenda

Figure 1.1: Commuter Making Payment Before Boarding Taxi

Source: Tapifare, 2012

Figure 1.2: Commuter Presenting CSC to Contactless Reader


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Figure 1.3: Smart Card Payment Process in Taxi Environment


Figure 1.4: Payment Transmission Process


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Appendix C: Research Agenda

Automated Fare Collection Individual Questionnaire

Tel: 072 460 2037 E-mail: [email protected]

Participant Number:

This interview forms part of a research project by Peter Muwanula of the University

Of Johannesburg, Kingsway Campus. The goal of this interview is to try to

understand whether introducing a card type system for commuters to pay for fares

as opposed to receiving cash, can be adopted into the taxi industry and your

opinions of such a technology.

Researcher: To briefly explain what AFC is. No explanation of the benefits or barriers to be

given to the taxi owner. (Only product specifications to be explained)

• To notify the participant that the interview will be recorded and only used for research

purposes.

• To notify the participant that the researcher will be taking field notes.

Questions:

• What is it like being involved in the taxi industry?

• What got you involved in this industry and how long have you been operating as a taxi owner.

• What are the challenges in the industry that you currently face?

• What steps are you taking to solve the challenges?

• Do you like receiving cash as a means of payment or would you like to receive your payment in another form? i.e: coupons, tickets etc and why.

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mailto:[email protected]

• The cash that you receive do you bank it and why?

Researcher explains automated fare collection system in conjunction with illustrations.

• From what I have told you earlier on about automated fare collection systems, what is your opinion?

• What is your opinion on what the NDoT is trying to achieve with regards to AFC?

• Do you think that the support the NDoT is giving to the transport industry in

terms of creating an environment to accommodate AFC is a reason for you to make use of this technology?

• What do you think the benefits might be to having this sort of technology in

your taxi? That is using cards to accept payment as opposed to cash.

• What do you think might stop you from having this sort of technology in your taxi? That is using cards to accept payment for commuter trips as opposed to cash.

• As an individual involved in the transport industry do you frequently look out

for new ways to operate in your business so that it performs better? Respondents are probed to elaborate

• Having discussed all of this, would you like to have this system in your taxi?

• Do you have anything more that you would like to say about this system?

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BIOGRAPHICAL QUESTIONNAIRE RESEARCH QUESTIONNAIRE Please complete the following questions. For statistical purposes, it is important that you complete all questions. Results gathered from this questionnaire will be held strictly confidential. GUIDELINES FOR ANSWERING THE QUESTIONNAIRE • Please answer all the questions. • Unless specified otherwise, only choose one option from all the questions and

mark it with a "X". SECTION 1: BIOGRAPHICAL INFORMATION

Complete the following: 1. Indicate your gender. Male 1 Female 2 2. Indicate your age group. Under 25 1 25 – 34 2 35 – 44 3 45 – 54 4 55 and older 5 3. Indicate your racial classification. African 1 Coloured 2 Indian 3 White 4 Other (Specify) __________________________________________________________

5

4. Indicate your language preference. Afrikaans 1 English 2

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Nguni (Zulu, Xhosa, Swati, Ndebele) 3 Sotho (Sepedi, SeSotho, Tswana, Seshweshwe) 4 Venda 5 Other (Specify) _________________________________________________________

6

5. Identify your highest level of education completed. Less than grade 12 1 Grade 12 2 Tertiary 3 6. Number of years operating in the taxi industry 0 - 5 years 1 6 - 10 years 2 11 -15 years 3 15+ 4

7. Number of Taxis owned 2 - 3 1 4 - 6 2 6 + 3 8. Distance of routes travelled 10-20 km 1

21-50 km 2

51-100 km 3

100+ 4

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Appendix D: National Land Transportation ACT, 2009: Regulations Relating to Integrated Fare Systems

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16 No. 34363 GOVERNMENT GAZETTE, 17 JUNE 2011

DEPARTMENT OF TRANSPORT DEPARTEMENT VAN VERVOER

No. R. 511 17 June 2011

NATIONAL LAND TRANSPORT ACT, 2009

REGULATIONS RELATING TO INTEGRATED FARE SYSTEMS

The Minister of Transport has under section 8(1) (b) of the National Land Transport Act,

2009 (Act No.5 of 2009), and in consultation with the MEe's for Transport made the

Regulations in the Schedule.

These Regulations are published for general information and compliance.

S'busiso J Ndebeie

Minister of Transport

Date 2011-05-27

Reproduced by Sabinet Online in terms of Government Printer’s Copyright Authority No. 10505 dated 02 February 1998

STAATSKOERANT, 17 JUNIE 2011 No. 34363 17

SCHEDULE

Definitions

1. In these Regulations, any word or expression to which a meaning has been assigned

in the Act shall bear the meaning so assigned and unless the context otherwise indicates

"AFC" means automated fare collection;

"AFC data structure" means the automated fare collection data structure, which utilises

specific tags on the EMV chip of bank issued fare media for electronically recording and

retrieving public transport-related data;

"AFC Guideline" means the automated fare collection guideline document, which includes

the

(a) AFC Data Structure; and

(b) MIOS for Information Systems in Government,

and which is obtainable from the Department;

"AFC system" means the automated fare collection system, which

(a) enables the electronic collection of public transport fares and associated data; and

(b) comprises a bank issued fare media system;

"Sank Issued Fare Media" means a participating bank issued payment instrument based

on EMV specifications and conforming to the requirements of the AFC data structure;

"Bank Issued Fare Media System" means a fare collection system, which comprises

(a) a payment instrument distribution network and value loading infrastructure;

(b) an electronic payment transaction clearing and settlement function;

(c) a payment transaction initiation and acceptance infrastructure and acquiring function;

and

(d) associated information systems utilised for the management and analysis of fare

schedules and data so collected and their conversion into information;

"EMV" means the integrated circuit card specifications for chip-based bank issued fare

media and point of sale ("POS") acceptance devices;


18 NO.34363 GOVERNMENT GAZETTE, 17 JUNE 2011

"EMVCo" means the independent organisation formed in 1999 by the EMV card

associations to manage and enhance the EMV specifications;

"EMV specifications" means the specifications managed and enhanced by EMVCo, which

cover elements such as general physical characteristics of terminals, the terminal-card

interface, including contactless interface for initiating payment transactions, transaction

processing, data management and data security;

"ITS" means intelligent transport systems;

"legacy AFC system" means any existing AFC system, whether fully operational or not, of

which the banking industry does not form part through any bank issued fare media;

"MIOS for Information Systems in Government" means Minimum Interoperability

Standards for the Public Service, issued in terms of Chapter 5, Part III, regulation B.1 of the

Public Service Regulations, 2001, as published in Government Notice No. R. 1346 of 1

November 2002 as amended from time to time;

"participating banks" means banks which are members of the Payments Association of

South Africa and the relevant payment clearing house;

"payment clearing house" means a payment clearing house as defined in section 1 of the

National Payment System Act, 1998 (Act No. 78 of 1998);

"Payments Association of South Africa" means the payment system management body

recognised by the Reserve Bank in terms of section 3 of the National Payment System Act,

1998;

"SiANSA SC71 H Committee" means the technical subcommittee responsible for

developing new standards or amending existing standards for ITS in terms of the Standards

Act, 2008 (Act No. 29 of 2008);

"the Act" means the National Land Transport Act, 2009 (Act NO.5 of 2009).


STAATSKOERANT, 17 JUNIE 2011 NO.34363 19

Purpose of Regulations

2. (1) The AFC system for any public transport service must comply with the requirements

contemplated in these Regulations.

(2) The requirements must be read together with the AFC guideline.

(3) In the event of any inconsistency between these Regulations and the AFC guideline,

these Regulations shall prevail.

Requirements for AFC system implementation in public transport

3. The following minimum requirements apply to AFC system implementation in public

transport:

(a) To achieve an integrated AFC system for public transport that is compatible

nationally

(i) AFC must be made through any bank issued fare media;

Oi) AFC must be interoperable through all participating banks;

(iii) clearing and settlement of payment transactions must take place through the

National Payment System in accordance with the National Payment System

Act, 1998 (Act No. 78 of 1998);

(iv) passengers with a suitabie bank account must be able to use bank issued

fare media obtained as a result of their relationship with any participating

bank;

(v) passengers without a suitable bank account must be able to obtain prepaid

stored value bank issued fare media from a participating bank or a third party

card issuer operating in conjunction with the participating bank;

(vi) the payment system must adhere to the banking and payment regulatory

framework; and

(vii) the AFC data structure must be loaded onto all bank issued fare media;

(b) occasional or infrequent passengers of public transport services which have

implemented AFC may be able to obtain a prepaid single trip ticket from the public

transport operator who is providing the singie trip public transport service or any third

party operating in conjunction with that operator: Provided that

(i) the prepaid single trip ticket is issued exclusively for the redemption of the

single trip public transport service provided by that operator;

(ij) the prepaid single trip ticket consists of any appropriate fare media and not

necessariiy a bank issued fare media; and

(iii) the prepaid single trip ticket is non-reioadable;


20 No.34363 GOVERNMENT GAZETTE, 17 JUNE 2011

(c) in the transportation data system for those public transport services that have

implemented AFC

(i) public transport data must be collected electronically through the AFC system

concurrently with the payment or redemption transaction;

(ii) the relevant organ of state must take ownership of the data collected through

the AFC system;

(iii) data must be collected for planning and operational purposes, and must

include data per transaction on location, fare and passenger;

(iv) the database must enable the extraction of suitable data by the relevant

organ of state for planning, monitoring, subsidy management and related

purposes; and

(v) the data system must comply with the MIOS for Information Systems in

Government;

(d) the AFC system must be flexible to accommodate fare structures based on local

needs, but must be aligned with any national fare policy, which may be adopted from

time to time;

(e) the AFC system must comply with the relevant standards endorsed by the STANSA

SC71 H Committee, which conform to these requirements, or, if there are no such

standards, international non-proprietary open standards, to ensure compatibility as

contemplated in section 8(1 )(b) of the Act; and

(f) legacy AFC systems, which do not comply with these requirements, must be either

upgraded to comply with them or be phased out.

Date of compiiance

4. (1) After the date of publication of these Regulations, all new AFC systems in public

transport services must comply with the requirements contemplated in regulation 3.

(2) Any legacy AFC system must be able to accept bank issued fare media within five

years from the date of publication of these Regulations.

Implementation process

5. (1) The AFC system implementation process must be planned in a systematic manner,

taking due cognisance of technical and operational requirements.

(2) Resulting technical and functional specifications must be developed as input into the

design process.


STAATSKOERANT. 17 JUNIE 2011 NO.34363 21

Short tItle and commencement

6. These Regulations are called the Regulations relating to Integrated Fare Systems,

2011 and come into operation on the date of their publication in the Gazette.


Automated Fare Collection Systems

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