The taxi industry could be subsidised by the government as early as next year, with the George area set to be the first to benefit in the province.
The provincial department of transport and public works says public transport subsidies could be extended to the taxi industry as early as April as part of the government's plan to build a comprehensive transport system.
The principle of subsidising taxis has already been agreed to as national policy.
Sipho Afrika, the department's director of modal contract development, said the province was investigating creative ways of funding subsidised contracts to cover small bus operators and minibuses.
This could see the city's commuter bus operator Golden Arrow being stripped of its monopoly status.
The bus operator is the only subsidised road-based transport, getting almost R500 000 from the provincial government every year. Metrorail gets its subsidy from the national government.
Afrika said the province was in "advanced" stages of restructuring public transport with detailed designs of the plan having been completed and its business plan already submitted to the national Department of Transport.
"The intention is to bring competitiveness into the public transport sector. We are looking at public transport that will be accessible to everybody.
"The majority of commuters in the province use taxis and it makes more sense if we extend subsidies to minibus taxis," he said.
Afrika said the George Mobility Strategy was being used to drive the process since the town's public transport system was "less complex" than Cape Town's where there were more players.
But he warned that taxis would have to operate as formal and sustainable businesses to make payment of subsidies easier.
The restructured plan would see the phasing out of the "ineffective" interim month-to-month contracts between the government and bus operators and transforming these into seven-year contracts.
The George contract would be the first seven-year contract which was expected to be awarded in April next year.
He said under the new system taxis could be seen as providing a feeder system from small corridors into bigger ones, and buses would run in bigger corridors.
Under the new contracts, which would also see electronic fare-management and intelligent transport systems introduced in the near future, public transport operators could see themselves getting performance-based contracts that would stipulate that they be paid according to work delivered.
This would force operators to be more competitive and efficient. Afrika said the province was awaiting approval from the national government to start negotiations with Golden Arrow on a seven-year contract to replace its month-to-month contract.
Golden Arrow failed to comment before the time of going to press.