5 November 2012

Uganda: Rocky Road for Pioneer Buses

The management of Pioneer Easy Bus has announced its intention to suspend bus operations in Kampala city due to failure of the KCCA to honour its ... ( Resource: Pioneer Bus Company Issues Threats to Uganda's City Council )

Bus chaos yet another reminder of government failure to sort out public transport industry:

When Pioneer Easy buses hit the roads in March, there was a huge sigh of relief from thousands of commuters as the company promised lower fares, safety, comfort and employment to hundreds of Ugandans. Eight months later, the future of the company looks bleak.

The company's Chief Executive Officer, Seyi Osiyemi, has reportedly left the company. The public relations manager, Connie Nankya, has also resigned for unclear reasons - but most likely financial. The company's drivers recently went on a sit-down strike over unpaid allowances and salaries. Additionally, Kampala Capital City Authority (KCCA) has not been paid Shs 2.4 billion for the last 8 months, as a charge for the100 buses plying in the city.

Each bus reportedly makes about Shs 500,000 per day in revenue. But the company spends at least Shs 600, 000 daily on each of its 100 buses in fuel, remittances to the bank and tax arrears to URA. This is on top of weekly allowances to drivers, stewards and inspectors and salaries of other administrative staff. The bus company is also supposed to pay a monthly fee of Shs 300, 000 to KCCA per bus. But with the huge costs coupled with the fact that the buses are breaking down all the time, PEB is clearly making losses and is almost defaulting on the loan it obtained from Standard Chartered Bank to procure the buses. Had Parliament not thwarted the company's plan to get a government guarantee on a loan from the Exim Bank of China for 500 buses interest-free, the company would probably have found the journey a little easier. Also, URA rejected the company's pleas for its buses to be exempted from taxes. It appears there were many miscalculations, which brings the soundness of its business plan into question. When the government guarantee fell through, the Exim Bank loan also stalled. The company had no choice but to go local. The directors resorted to Stanchart for the loan with the buses as security but the bank insisted on property as security. Luckily, they found a property owner who offered Okello House as security for a loan of about $500,000 (about Shs 1.25 billion). On getting the money, a consignment of 100 buses arrived in the country and hit the roads. However, for yet unclear reasons, a wrangle broke out amongst the directors, with the result that one group resorted to court action. Consequently, Mathew Rukikaire, the majority shareholder, got fed up and threw in the towel.

Recent reports say the company is trying to enlist the support of the experienced Uganda Taxi Drivers and Operators Association (Utoda) to save it from collapsing.

Peter Kaujju, the KCCA publicist, confirmed that the company had not remitted even a shilling to KCCA but said they were waiting for a report from the Parliamentary Committee on Public Service and Local Government to take action.

In March when the buses started plying the Eastern and the Western routes in Kampala on a five-year contract, sections of the media and some members of Parliament questioned how PEB acquired the license from KCCA to run the bus service in Kampala. Some sources cited corruption and politics in the process hence prompting Parliament to intervene.

"We will authoritatively deal with the company's operations in the city after the report from the Committee in Parliament is released," Kaujju said.

Kalungu Woman MP Florence Kintu, who chairs the Parliamentary Committee, told The Independent on Oct. 25 that the report was ready and would be tabled when the House returns from recess on Oct. 30. She declined to reveal its contents.

"It will be our first priority when we return from recess. Of course I can't pre-empt what it contains before it is tabled in Parliament," Kintu said.

It is not clear whether the findings in the report would practically compel KCCA to regulate PEB activities. This is because the company's services also cross into other districts such as Mukono and Wakiso - way beyond KCCA's jurisdiction.

From the start, transport experts expected Pioneer to hit this bumpy section. They say for a city bus service to operate successfully and profitably, it has to be a public private partnership venture and there have to be bus lanes, fully trained staff, and strong institutions to monitor the system. However, few of these, if any, are in place to support Pioneer's operations.

In a recent interview, Kiggundu Amin Tamale, an urban expert and lecturer at Makerere University, told The Independent that the success of any rapid bus transit service depends on the infrastructure in place.

"We do not have any infrastructure in our city to support the system and that puts the company's operations at risk," Kigundu said, adding that even the competition from the commuter taxis was a big threat.

In many developed cities around the world, public transport has been successful because of a sound infrastructure, which is non-existent in Kampala.

Pioneer's problems:

A part from the lack of proper infrastructure in the city, there is a plethora of other daunting challenges that the fledgling company is facing. But in an interview with The Independent on Oct. 24, John Masanda, the company's chief commercial officer, said they had sorted out the standoff with the drivers and were all "happy" and business was "fine."

Masanda said it is not mandatory for the company to pay money to KCCA because they have "not formally started business."

"If you remember we were told to come in after taxis went on strike in March and we did not agree at what point to start paying the fees," he said, but quickly adding that they were in touch with KCCA about the matter.

The company had planned to bring in 522 buses in shifts of 100 but only 100 have come and a good number of them have already broken down and need expensive repairs. Sources said the Chinese buses are relatively weaker compared to other models yet they are overworked, overloaded and not properly maintained. Other sources said the company was contemplating resorting to stronger models that are better suited to Uganda's conditions.

However, Masanda maintained that the company is "still strong" to run the service and was not collapsing.

"A company that has the support of many customers cannot collapse," he said. "We are operating normally."

How the company will survive the endless problems it is facing is what remains to be seen. However, thousands of bus users are desperate to see the buses remain. The buses charge less than half of the fare charged by commuter taxis.

"The buses have helped us so much because we pay affordable fares compared to what we used to pay to commuter taxis," said Joyce, a daily commuter on the Mukono route. "God should help us so they stay."

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