The Bus Rapid Transit (BRT) systems set up in major metros are making losses “significantly higher than anticipated”, this year’s Budget Review reveals.
These systems are, at best, recovering 40% of their operating costs through fares, a Treasury official told City Press this week.
The problem is largely the apartheid spatial legacy, which makes cost-efficient public transport incredibly hard to provide.
The systems in Johannesburg, Cape Town, Tshwane, eThekwini and other cities are based on a model that has been successful in South American cities.
The BRT systems in the Colombian cities of Bucaramanga and Barranquilla are raking in 150% of their operating costs from passengers, according to an analysis in the Budget Review.
Bogota in Colombia and Lima in Peru have BRT systems that are also comfortably breaking even, while Leon in Mexico and another Colombian city, Pereira, are covering about 90% of their costs themselves.
In South Africa, Treasury says achieving 40% is doing well.
Two major metros with BRT systems, however, challenge that percentage.
Lisa Seftel, Johannesburg’s executive director of transport, said: “The percentage is not correct. It is, however, true that fare revenue covers less than 50% of direct operating costs.”
According to the city’s latest annual report, the Rea Vaya BRT system collected fares of R103 million in the financial year to March 2016.
The MyCiTi BRT system in Cape Town is doing better than 40%, said Brett Herron, the city’s mayoral committee member: transport and urban development authority.
MyCiTi pushed its cost recovery up to 49% in the past financial year, he said.
The direct operating costs are, however, not the whole cost of the system. Treasury already provides two subsidies at a national level. It covers the overhead operating costs excluding the fuel and drivers’ wages.
This came to R290 million in Johannesburg in the year and about R250 million in Cape Town.
Treasury also covers the capital expenditure on the buses and lanes. That came to R864 million in the year in Johannesburg.
This contribution is declining, which is another cause for concern.
Herron said that this month’s national budget would cut Cape Town’s capital expenditure subsidy by R400 million over the three years to 2020.
The city will have to cover more itself for planned expansions of the system to Mitchells Plain and Khayelitsha.
It is “not possible or desirable” to have public transport that makes a profit, added Herron. Cape Town capped its expenditure on MyCiTi at 4% of the city’s rates income. It was not hitting that cap yet, said Herron.
As a major public transport initiative, the BRT systems were always going to require subsidies.
They were, however, expected to cover a portion of their costs “far nearer to 100%”, said the Treasury official.
“To ensure these losses do not break municipal budgets, cities are working with the department of transport and Treasury to maximise efficiency,” said the Budget Review.
Efficiency gains will, however, only get you up to covering 40% of your costs, said the official.
The problem is the nature of South African cities themselves.
Low urban density, and an extreme separation of residential and business districts made the model uneconomical, said Treasury.
Johannesburg, referring to the municipal boundary including several suburbs as well as the inner city and business nodes, has on average only three inhabitants per square kilometre.
In the South American cities where the BRT model is working well, the population density is at least double that and often far more.
“It’s only partially about [passenger] volumes and partially about structural features,” said the Treasury official.
“In Colombia, you have more of a mix of economic and residential areas. You also have people getting on and off more because they visit more parts of the city. Here, people get on at one end and get off on the other. That means less fares. To get to these [Colombian] comparators, you need a different urban structure,” said the official.
Both Johannesburg and Cape Town say that their future developments of residential areas will address this apartheid-era legacy over time.
What to do
Ironically, one of Treasury’s proposals is to “use minibus taxis in areas where formal bus services are not viable”.
The BRT routes had originally displaced taxi routes and taxi associations were paid compensation to give up their licences. Taxi owners who were affected were given equity in the ventures.
According to Herron, the negotiations with the taxi industry, and the buyouts, contributed to the higher than anticipated costs.
“These extra costs in the initial contract period are being accommodated and are, in our view, justified,” he said.
Apart from the dedicated “trunk routes” – the special lanes reserved for the buses – the BRT systems involve “feeder” routes using smaller buses that travel through normal traffic.
“The feeder services have proven to be costly to operate with a low cost recovery from fares ... the trunk services have a good cost recovery ratio,” said Herron.
It seems minibus taxis serve this function more efficiently.
“The minibus taxi industry will in the future allow for more efficient integrated intermodal services,” he said.