AFRICA S BEST 350 LTD PRESENTATION TO THE COMPETITION COMMISSION AB350LTD LEGAL ENTITY ESTABLISHED BY SMALL BUS OPERATORS
TABLE OF CONTENTS F 1. VISION, MISSION AND AB350 VALUES; 2. EXECUTIVE SUMMARY 3. MARKET OVERVIEW 4. SUBSIDY ALLOCATION: PROVINCIAL OVERVIEW 5. GRANT ALLOCATION PER PROVINCE 6. SUBSIDY ALLOCATION VS POPULATION 7. GRANT ALLOCATION PER PROVINCE VS # OF SBO 8. COMPANY SOCIO ECONOMIC IMPACT 9. CHALLENGES 10.RECOMMENDATIONS 11.SUPPORT NEEDED
F VISION, MISSION & VALUES VISION We are a leading, growing, world class and preferred passenger transport operator in South Africa and beyond. MISSION To deliver quality, safe, reliable and cost-effective transport services to our customers through empowered and dedicated staff. CORE VALUES Service Excellence Innovation Integrity Accountability Teamwork Commitment Respect
EXECUTIVE SUMMARY F Africa s Best 350 (AB350) (Pty) Ltd (Reg. No. 2005/021846/07) is a leading rural and urban bus passenger transportation company, which was launched in 2008, presently with a fleet of 180 buses that operate in 136 routes across the Province of the Eastern Cape of which 134 are subsided routes with 1 outstanding in phase 2 due to department s fiscal constraints and for phase 3 there are still 30 outstanding routes The company was established as a single legal entity of Small Bus Operators (SBOs) organised from various regions namely: Alfred Nzo, O.R. Tambo, Chris Hani, Joe Gqabi, Amatole and Cacadu of the respective District Municipalities. The company is 100% Broad Based Black owned by 218 black SBOs (Small Bus Operators) throughout the district municipalities of the Eastern Cape. The company has 33% black women ownership and the AB350 Board of Directors is comprised of 9 directors in total. AB350 operates 180 buses in 8 depots for the provision of rural commuter operations in the former Transkei, in the Eastern Cape with Head Office in Mthatha. In 2016 the company conducted 6 000 000 passenger trips on the 136 negotiated subsidy routes provided by the Eastern Cape Department of Transport. AB350 was awarded the BBQ Black Business Best Established Black Business Award in Kempton Park Towards the end of 2014 the company sort to establish a bus repair facility [BRC] where its major mechanical and body repairs could be carried out, for which the necessary funding is own funds and strategic partnership with National Empowerment Fund (NEF) which provided loan facility.
EXECUTIVE SUMMARY CONT F AB350 plays a pivotal role by providing social commuter services as the basic means of access and mobility to support the integration of sustainable rural communities into the social and economic life of the former Transkei in the Eastern Cape. The Eastern Cape Dept. of Transport provided R40 million CAPEX grant and issued a staggered 3 Phase Negotiated Subsidy contract as follows: March 2008 Phase 1 58 buses 55 routes June 2010 Phase 2 59 buses 55 routes [1 route still outstanding in QTN] July 2016 Phase 3 25 buses 25 routes The EC DoT provides a subsidy of approximately 60% of total revenue (including subsidy) on the routes operated for all 3 Phases currently operated. AB350 is the only subsidized, safe, reliable and quality mode of transport in the former Transkei Region.
FCOCC MARKET OVERVIEW According to Who Owns Whom, Minibus Taxi and Bus Industry report compiled in December 2016, there are 19 000 000 South Africans who daily brave public transport to get to school, studies, work and access social services. The number of subsidised buses in South Africa is in the region of 19 000, providing 912 million passenger trips per annum travelling an estimated 1.4 billion km. The bus industry provides permanent employment to 34 500 people annually. On average, 50% of commuter bus operator income is derived from subsidies with the other 50% derived from fares. The comparative budgeted annual subsidy allocations for provinces for bus commuter transport as published in the Division of Revenue Act (DORA) No. 3 increases are as follows: 2017 2018 2019 DORA Budgeted Subsidy R 5 400 000 000 R 5 700 000 000 R 6 000 000 000 Annual Increase 6% 5%
SUBSIDY ALLOCATION - PROVINCIAL OVERVIEW Province No. of Regions Population No of Area (km) Operators *PTOG Allocation R'000 Eastern Cape 6 6 562 053 168 966 351 199 595 Free State 4 2 745 590 129 825 40 220 669 Gauteng 5 12 272 263 18 178 197 1 860 048 KwaZulu Natal 10 10 267 300 120 361 87 924 766 Limpopo 6 5 404 868 125 755 298 298 Mpumalanga 3 4 039 939 76 495 203 502 272 Northern Cape 6 1 145 861 372 889 170 44 907 North West 4 3 509 953 104 882 150 92 313 Western Cape 5 5 822 734 129 462 200 796 580 *2016 Public Transport Operator Grant
GRANT ALLOCATION PER PROVINCE *PTOG Allocation R'000 199 595 220 669 44 907 92 313 796 580 502 272 1 860 048 298 298 924 766 Eastern Cape Free State Gauteng KwaZulu Natal Limpopo Mpumalanga Northern Cape North West Western Cape
SUBSIDY ALLOCATION VS POPULATION Subsidy Allocation per Province 14 000 000 12 000 000 10 000 000 8 000 000 6 000 000 4 000 000 2 000 000-2 000 000 1 800 000 1 600 000 1 400 000 1 200 000 1 000 000 800 000 600 000 400 000 200 000 - Population *PTOG Allocation R'000
GRANT ALLOCATION PER PROVINCE VS # OF SBO 400 350 300 250 200 150 100 50 0 2 000 000 1 800 000 1 600 000 1 400 000 1 200 000 1 000 000 800 000 600 000 400 000 200 000 - No of Operators *PTOG Allocation R'000
FCOCC COMPANY SOCIO-ECONOMIC IMPACT POVERTY ALLEVIATION NUMBER OF EMPLOYEES = 520 IMPACT ON AVERAGE OF 5 [Family size] = 2 600 people benefiting NUMBER OF ROUTE RENTALS = 136 IMPACT ON AVERAGE OF 5 [Family size] = 680 TOTAL IMPACT = 3, 280 [Alleviation of poverty] INCLUSIVE ECONOMIC DEVELOPMENT SMME SUPPORT SUPPLY CHAIN SPENT ON KEY BUS EXPENDITURE = R54M per annum PENSIONERS TRANSPORTED PER MONTH [8,800] = 105, 600 PER ANNUM PUBLIC PASSENGERS 500 000 PM = 6 000 000 PER ANNUM NEW PROJECTS 1. BRC[Number of employees estimate] = 200 [1 000] KM TRAVELLED 420 648pm = 5, 047,776km [2018] This is the social economic impact of the small public bus operations of AB350
CHALLENGES FOR HISTORICALLY DISADVANTAGED PLAYERS IN THIS INDUSTRY F a) Lack of maintenance of existing rural road infrastructure increase operating costs. b) Funding of public transport remains a serious problem which implies that contract escalation is purely based on the Division of Revenue Act (DoRA) which is much lower than that set out in the terms and conditions of the initial contracts and that of the real and actual main cost drivers in the Company with severe negative impact on the profitability of the company and the following performance areas. c) Ability to maintain bus replacement programmes; Service levels and reliability; The long term financial sustainability of the Company; Bus safety due to Taxi violence and crime, Changing customer service needs. d) Frequent dispatch of technicians who also work around the clock to repair the bus, resulting in additional overtime; This manifestation curtails and prohibits any growth as any expansion requires substantial capital outlay by the Company.
RECOMMENDATIONS Level subsidised public passenger playing field through: Reallocating subsidies from dominant major player to SBO s Equitable allocation of subsidy commuter contract across all subsidised bus operators Effective implementation of municipal by-laws and central park and ride facilities for all operators Implementing authority municipality & transport department to determine demand, utilisation, efficiency and route demand for transport operations Inclusive access to urban routes as well, major players must share resources and SBOs must have direct participation. The industry is capital intensive as such needs resourcing.
F RECOMMENDATIONS CONT Improvement of infrastructure on the roads as it affects repairs and maintenance and life of the buses; Support bus operators to acquire resources to do small maintenance on the roads without taking over the role of public works; Support to educate all stakeholders especially school children on road safety; AB350 is in the process of implementing Road Trasnport Management System [RTMS] in partnership with Standard Bank, the appeal is for government to support this initiatives by providing resources as it is going to require the company to implement Organisational Development and Change; Timeous payment of grants; Close monitoring of petrol hikes which influence competitiveness in the industry.
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