Metro Bus to be sold off and unbundled

A Future Options Study on the future of Metro Bus commissioned by the City of Johannesburg came up with a number of proposals early 2011. The mayoral committee resolved in its meeting on 13 October 2011 that Option 2, that speaks to the unbundling of the entity, is the best future option for Metro Bus. 

The unbundling of Metro Bus into four companies, will be linked to the three existing depots namely, Milpark, Roodepoort and Village Deep. The fourth company will assume all responsibility for the maintenance of the three fleets. The city will subsidize the entity by paying a fee per kilometer subsidy to the companies. The companies would be subject to a service level agreement with penalty clauses to protect the COJ failure to deliver on their agreed mandates. 

In the ideal world this would be an ideal concept, but unfortunately, the economies of scale just do not permit and in the long run this doesn't make the companies economically viable. Not all routes are equally sustainable; therefore we currently do have cross-subidisation for longer less viable routes. The depots will not all be running an equal chunk of the existing service and it will be determined by the routes that are currently operational and linked to that depot. 

In terms of this model the four companies (3 x bus and a maintenance company) will be owned by the bus drivers, maintenance staff, private stakeholders (including taxi operators). They will operate on existing Metro Bus routes to run a company on a fee per kilometer subsidy. An inflated salary bill can be expected as this will now have to include 4 x managing directors, 4 x financial officers, 4 x HR managers, 4 operational managers and 4 times the number of support staff. This additional cost would bring about a phenomenal increase in the operational budgets. 

More than 60% of the Metro Bus operational budget gets spent on salaries compared to the 30% of a private company such as PUTCO. Metro Bus drivers earn around R14 000 a month compare to the R8 000 per month of drivers of the city's own BRT project. Currently the Metro Bus service operates on a per kilometer fee of R35 while the National Department of Transport norm is a fee of between R22 and R25. 

The Democratic Alliance will lobby and strongly recommend that the entity be sold in its entirety to a single company with a 30% driver share option that can be funded from their pension contributions if they so wish to do. The rest of the company can be sold as a company composed of the city's own requirements in terms of BEE scoring. This would ensure driver loyalty, especially in terms of the bargaining council and salary bills. Cross subsidy of the longer less profitable routes will further decreased the required fee per kilometer rate. This will contribute to an overall sustainable viable private company with increased black shareholding. 

It has also come to light that Metro Bus has been running at an increased loss of R14 million between September 2011 and January 2012. This increased loss in spite of rescheduling of services, the removal of 42 old buses from the fleet and 40 less drivers which actually should have further decreased the operational and maintenance budgets of the entity. 
The company made a net loss of R5.6 million for the 12 month period of the financial year ending June 2011. 

A simple mathematical equation would prove that instead of a sustainable model that the remodeling hopes to achieve, the effect of an increased salary bill and the inability to cross subsidize less financially sustainable routes will have an increased fee per kilometer of between R42 and R45 on the future of this new Metro Bus model. 

Statement issued by Clr Nico de Jager, Shadow Member of Mayoral Committee for Transportation, Democratic Alliance: City of Johannesburg, March 6 2012

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