10 January 2014

Uganda: Pioneer Buses Get Second Chance On the Road

The management of Pioneer Easy Bus Company says they intend to implement an automated fare collection system when they resume business after a one-year stoppage. Under the new system, passengers will no longer pay their fare on board the bus. Instead, intending passengers will be required to buy electronic 'fare cards' for the amounts of credit the passengers will have purchased.

This is the same system as the mobile phone cards and the Umeme Yaka pre-paid system. In the Pioneer bus card system, however, the customer will insert their card into a machine installed on the buses, which will read the card and if it has credit, will allow the passenger to board.

This comes a few weeks after Uganda Revenue Authority formally agreed on December 20, 2013 with the bus company on how its pending Shs 8 billion tax debt will be repaid. The operations of the bus company were halted in 2013 and its buses impounded by the taxman after it failed to pay the tax arrears.

This new card system, company officials told The Independent on Jan,6, will ease payment for the service, reduce chances of cash theft by some untrustworthy workers, and hopefully increase the company's cash flow. The same system is used in other cities where public transport involving buses has been successful.

Under the system, a passenger will have to first tap their 'fare card' onto the installed electronic system on a bus before boarding. If the card has no balance, the machine will automatically inform the passenger that 'you have no balance' and they will have no chance of boarding!

Officials said the company will maintain the Shs 800 to Shs 1, 000 charges depending on the distance covered by the passenger.

"If we are to increase we will ensure that our rates remain lower than what others are charging," said Rebecca Athieno, the company's legal officer.

John Masanda, a director for PEB had told The Independent in an earlier interview that they might increase the fares by Shs 300 from the old charges of Shs800-1000.

Officials said the buses will operate on the Eastern and Western routes provided for in the current concession with KCCA.

Pioneer Easy buses were impounded early last year by the Uganda Revenue Authority after failing to meet the Shs 8 billion tax arrears.

The tax body ran adverts in the media of its intention to auction the buses, and President Yoweri Museveni intervened and halted the process.

He instead advised that the company be allowed to operate and pay the debt in installments. URA had refused but bent towards Museveni's advice at the end of last year and released the buses on condition that the bus company pays the debt in installments for a period of 24 months starting March, 2014.

By Jan. 6, company officials were still insisting that they were not ready to resume business until relevant bodies like Kampala Capital City Authority (KCCA), the ministry of transport and the leadership of Mukono, Mpigi and Wakiso districts sign a new deal specifically addressing issues that have to do with putting in place bus lanes and stops, providing exclusive routes for the buses, which transport experts have pointed at for partly failing the company's successful operations.

At that point, it remained unclear when the buses would return on the road.

But market watchers still question the company's success on its second coming amid a similar working business environment, without supportive infrastructure like bus lanes, exclusive routes, and clear bus stops. It is also not clear why negotiations with relevant bodies on the company's operations have taken this long. On the face of it, some of Pioneer's demands cannot simply be met in the short-run, experts say.

Pioneer buses are also returning to the market to face a competitor, the Awakula Ennume buses of the Uganda Taxi Operators and Drivers Association (UTODA), who quietly filled the gap when Pioneer stopped.

Transport and Urban Planning expert, Amin Tamale Kiggundu says it is not easy to run a profitable public transport business in the city that has no such supportive infrastructure among other challenges. Kiggundu told The Independent that Pioneer faces various challenges ranging from management, financing and operational environment, with some requiring government's intervention to enable the bus company recover its investment, expand and provide better services to passengers.

For instance, he said, transport fares should be determined by the market forces/changes.

"When there is a change in fuel prices or in prices for spare parts, the company is able to adjust fares accordingly for it to remain in business," Kiggundu said, adding there is a need for government, company owners to build skills in financing, management etc in public transport.

He also suggested that Pioneer needs to diversify its sources of income and invest in other areas.

Currently PEB depend on fees collected from passengers and loans from banks, which Kiggundu says are not enough viable options given the dynamics of Uganda's and global economies, and the 'huge' amounts of money required to invest in such a business.

He said in countries like Nigeria specific banks are told by government to design specific products to fund urban infrastructure developments and businesses including transport by offering soft/affordable loans.

"This is a good example for us," he said.

He also suggested that government should give incentives to the company like tax incentives/holidays and implement a contract that will favour the company's growth at the same time support growth of public transport in the city.

"In other countries, such buses would not be subjected to import taxes," he said. As expected, he urged authorities to put in place supportive infrastructure such as bus lanes, exclusive routes for buses and stopovers to boost PEB's operations.

He also advised the company to put in place customer care initiatives to equip passengers and other stakeholders in the industry on new developments in the sector.

"This is happening in cities where public transport has been successful," he said.

In fact, President Yoweri Museveni, suggested similar ideas when he stopped the auctioning of the buses, in May last year faulting the government's tax policy.

"If government wants to decongest the city, isn't it in public interest that people import buses tax free," he said.

Museveni said he would also support a proposal by KCCA to give Pioneer Buses exclusivity on particular routes so it can maintain low fares for travelers.

Company directors reportedly told the president that they accumulated debts of up to Shs14 billion in losses because they were forced to operate before some concessions with KCCA were put in place when taxi operators conflicted with KCCA over monthly taxi charges.

It remains unknown whether these suggestions will be implemented to support the company and public transport in the city going forward. But company officials remain optimistic they will be back on the road.

"All the buses are fine, have been tested and plans are on to bring in more," Rebecca Athieno; the company's legal officer, told The Independent.

Charles Sekitto, the company's payroll officer said that discussions about the comeback of buses were delayed by festive holiday. Sekitto said the company's daily fees collections amounted to Shs 40 million excluding revenues obtained from advertising.

While releasing the buses at the end of last year, Abdu Sallam Waiswa, the URA's manager for debt collection said PEB will be paying around Shs 300m monthly for the period up to 24 months for the debt to be recovered. He warned however, that the buses are subject to a caveat.

"No other company or individual demanding anything from the company can attach them before they finish our (URA) debt and no one is allowed to buy or sell the buses," he said.

Waiswa said URA had reached the agreement with PEB because URA is a listening institution and gives time to tax payers to meet their tax obligations for such companies and the economy to benefit.

"That is how we arrived at that decision," he said, but warned, should the company fail to pay the money, the tax body, will follow the law and auction the buses so as to recoup some of the debt.

He said the two parties agreed not to attach interest on the Shs 8 billion.

"That one we will discuss later after getting the Shs 8 billion," he said.

There are other issues the bus company has to solve. For instance, it owes unknown amounts of money to its employees, and KCCA, among others. Company officials say the company had 500 employees, 400 of these were drivers and ticket issuers, 100 were contracted in other fields.

Sekitto said the two parties; PEB and workers, will discuss on possible ways to resume their working relationship when the busses get back on the road.

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