The[South African] government's taxi recapitalisation programme is supposed to fix a set of problems that plague the local taxi/minibus industry. Taxi violence, unsafe vehicles and bad driving habits among taxi operators combine to make the industry unpopular and, in some cases, unsafe.

The changes mandated by the programme will, presumably, go a long way towards creating a less dangerous environment for the people in the industry, as well as for passengers and other drivers. At least, that's the hope.

The programme attempts to create a safer environment by requiring all minibus owners to exchange their old vehicles for new, larger minibuses. The government will give taxi owners a R50000 subsidy towards the purchase of the new vehicles and old minibuses will be scrapped. However, this subsidy is unlikely to cover the full costs of purchasing a new minibus. So while some operators will put new vehicles on the road, others will continue to skirt the authorities, driving their old taxis.

The programme also requires taxi owners to convert their old radius-based permits (allowing them to carry passengers anywhere within a particular geographic area) to route-based operating licences (which require the drivers to stick to a specific route). The hope is that taxis will stop to load and unload passengers only along these designated routes, thus lessening the problems caused by this practice.

And the programme is designed to shift control over taxi ranks from taxi associations to municipal authorities. By doing this the government hopes to lessen the tensions that arise when one association attempts to monopolise a rank and keep away competitors.

While the intentions behind these changes may be good, the consequences of the programme are likely to be less salutary. The programme will, for example, be a boon to some taxi operators and a real burden to others. Larger, wealthier operators are more able to afford the costs of replacing their minibuses than are smaller operators. And the local automotive industry, which will contract to provide the new vehicles, should also be quite happy. But who are the likely losers?

In the absence of a government subsidy for taxi fares, the programme will almost certainly lead to a fare hike for passengers. New vehicles will cost more than R50000, which means the operating expenses of all taxi owners will rise. These costs will likely be passed along to taxi consumers. For some of these passengers, fare hikes will be unaffordable and they will be forced to look for alternative modes of transportation: buses, trains and walking are possible options. But trains and buses run on schedules that can be inconvenient (meaning people will pay more in "wait costs") and walking is dangerous. In 2003, nearly 40% of all fatalities on South African roads were pedestrians. If a rise in taxi fares causes more people to walk, there's a likelihood pedestrian deaths will increase.

The programme will harm small-scale taxi entrepreneurs. The requirement that owners turn in old vehicles and replace them with big, new minibuses will simply be too onerous for many operators. Some legitimate taxi operators will go out of business and this will have an impact on people such as drivers, mechanics, minibus washers, hawkers and others whose livelihoods are tied to the taxi industry. Because fares are likely to rise due to increased operating costs, unlicensed "pirate" taxis will troll the roads looking to carry those passengers who don't want to pay the higher fares for the newer licensed taxis.

The taxi industry is anywhere from a R10bn-R16,5bn a year business. Hundreds of thousands of people work directly, or indirectly, in this business. The programme will put some of them out of work. This should be troubling in an economy with an unemployment rate over 26% (or 40% if one uses the broader definition).

Most troubling, however, is that the programme is likely to lead to a government-created cartel of larger-scale taxi operators. Because the subsidy to buy new vehicles will not be enough to cover replacement costs, the larger, wealthier taxi owners who are better able to absorb these and other costs associated with the programme will remain in the industry, while the small-scale taxi entrepreneurs are driven out. Fewer taxi operators means reduced competition and this spells trouble for consumers - higher fares.

There are problems in the taxi industry that need to be addressed but the programme will leave many problems unresolved, most notably problems related to poor law enforcement.

The programme will put bigger, new taxis on the road but at a real cost to taxi riders and small-scale taxi entrepreneurs.

It will not, by itself, transform bad or aggressive drivers into model operators. It will not ensure that taxi owners maintain their vehicles and it will not stop pirate taxis.

All of these things demand improved law enforcement efforts, something the programme does nothing to address.