The bus sector is bleeding

One of the highlights of the recent SABOA Conference was a presentation by Bazil Govender, the association’s executive manager. Sadly, this presentation was also a lowlight of the event – because Govender reported back on an industry survey, which reveals that the bus sector is bleeding.

Can you imagine the demise of bus operators in South Africa? Sure, we have minibus taxis, but the absence of bus operators would be devastating for commuters. And, based on the results of a survey amongst bus operators, I honestly wouldn’t be surprised to see some of them closing their businesses.

Govender gave the results of a survey into contracted provincial commuter bus transport operators dependent on the Public Transport Operations Grant (PTOG) at the SABOA Conference (you can read more about this event on page 30 of this issue). A total of 24 operators running 5 243 buses completed the survey. Of those buses, 4 734 are used for subsidised services, 432 are spare capacity vehicles, and 189 are used in unsubsidised services. So it was a fairly representative sample; the PTOG subsidy applies to around 6 170 buses in South Africa.

The first question respondents were asked pertained to the age of their bus fleets. The responses were worrying. Before the introduction of the PTOG, 91% of respondents reported that their fleets were less than 12 years old, compared to 71% of respondents currently. Significantly, 13% of respondents now report that their fleets are on average between 18 and 20 years old.

“It is evident that the current funding model and constraints have had a major impact on fleet renewal, higher operating costs (due to the older fleet), as well as less reliable services (due to more frequent breakdowns of older buses),” noted Govender.

The next question pertained to contract compliance and, once again, the answers were troubling. “It is concerning that only 21% of respondents believed they were ‘very likely’ to comply with their contracting conditions. Half of the respondents mentioned ‘likely’ as their response to the question. Conversely, 29% of respondents mentioned that they were unlikely to meet their contracting conditions.

“Influencing factors around contractual compliance could be financing issues, as the constrained PTOG escalations result in cash flow issues. Operators are unable to recover these shortfalls from the fare box, thus affecting their compliance rates with their contracting conditions. Other factors to consider include the poor operating conditions and policy uncertainty, which impacts long-term investment strategies in fleets,” noted Govender.

Some 58% of respondents strongly agreed that a deterioration in profitability was an area of concern. Furthermore, 46% strongly agreed that the future financial outlook of the company was an area of concern.

The industry isn’t taking the situation lying down. When it came to areas of focus for efficiency improvements,operational improvements were viewed as the most important priority by 83% of respondents, followed by technical and financial management and control systems (75%), and personnel costs (58%). “Clearly the industry views cutting of personnel costs as the ultimate last resort in contribution towards efficiency improvements,” said Govender.

He pointed out that these improvements have helped companies to cope with the unpredictability and inadequacy of one of its main revenue streams, the PTOG.

“However, it is evident that the industry is on the back foot with a decline in profitability, and there is a serious concern about the future financial outlook. The bus fleet is ageing, becoming less reliable and requiring increasing maintenance. The industry is also forced to introduce higher than normal fare increases due to the growing gap between costs and funding, which over time may result in a reduction in service quality – ultimately impacting bus commuters directly. The lack of adequate funding has also resulted in many areas not being served by buses – even where demand does exist. This feeds to a market that becomes ‘captured’ by the taxi industry,” warned Govender.

It’s a sorry state of affairs indeed. Let’s hope that the affected bus operators don’t just shut up shop and go in search of greener pastures.