An end to funding woes?

This year’s National Conference and Exhibition held by the Southern African Bus Operators’ Association (SABOA), attracted a massive crowd of bus and coach enthusiasts from all over southern Africa. JACO DE KLERK finds out why.

The CSIR Conference Centre in Pretoria was abuzz with conversation as SABOA’s 2013 National Conference and Exhibition got underway on February 28.
Ray Karshagen, joint CEO of MAN Truck & Bus South Africa (in charge of the company’s bus division) and a member of SABOA’s National Council, explains why: “The papers were excellent, very topical and interesting and this contributed to the large turnout of people.”

He adds: “It was a very well attended conference, with less associate or supplier members and more operators, which is great.” However, the excellence of the presentations didn’t mean that they all offered a rose-tinted view of the industry.

This is evident in the presentation delivered by Prof Jackie Walters, head of the Department of Transport and Supply Chain Management at the University of Johannesburg, who says that the commuter bus industry is currently going through one of its most difficult times, specifically with regard to funding.

Since 2009, the price of diesel has increased by around 80 percent. Labour costs have increased by 44 percent and maintenance costs by 33 percent. But bus subsidies have increased by only seven percent. Putco management states that during 2012, the Gauteng subsidies grew by only 3,5 percent, while the average monthly diesel price increased by 16 percent from 2011 to 2012.

This is problematic, as Franco Pisapia, MD of Putco, explains: “Bus companies get their revenue from two main sources; passenger fares and bus subsidies.” So if the latter is inadequate the former has to rise, which will have a negative impact on both operators and their passengers.

Walters adds: “At the heart of this problem is the negative impact that the Division of Revenue Act has on the financial wellbeing of companies.” Bus subsidies are paid mainly from the Public Transport Operational Grant as determined by the Division of Revenue Act. “But none of the provinces have a budget for this, so the industry is left with a three percent increase in subsidies against huge increases in fuel, maintenance and labour.”

And financing isn’t the only problem that Walters mentions, adding that he’s seen operators sign contracts where they have to give up specific portions of their existing business to accommodate taxis as well as small, medium and micro enterprise (SMME) operators.

“I don’t think that anybody has a problem with accommodating taxis and SMME bus operators in the formal system. It is widely accepted.” He adds that, “Within SABOA, 10 percent of the bus market is already run by SMME operators. But it is problematic to the industry if you take away from one segment and give it to another without actually adding to the existing bus transport system.”

He explains that there are roughly 7 500 buses receiving national subsidies. “If you look at SABOA we have between 6 200 and 6 500 buses within the association, but there are an estimated 140 000 taxis in the country. If you translate that to bus capacity, you are looking at 35 000 buses.” He adds that there are an additional
5 000 SMME buses looking to enter the subsidiary sector. “Add this together and you get 40 000 buses.

“There is no way that the existing industry comprising 7 500 busses can absorb all of this. The growth of an industry can’t be at the expense of the existing industry. The cake has to be grown with more funding and an expansion of the network.”

However, it wasn’t all doom and gloom as Karshagen points out: “There were people from the National Department of Transport talking about the tender system and about the upcoming negotiated contracts.”

He adds: “There is light at the end of the tunnel, and it isn’t a train coming at us at a high speed. I think it is starting to become a reality – this promise of the last 10 years of new contracts. It is the one big thing that will finally sort out the financing.”