Where is the business opportunity in Tondeka Metro?

When they gathered in Kansanga, Kampala to discuss the challenges in the public transport industry and execution of the Tondeka Metro project, many agreed that it was long overdue.

By many, this included the ministry of works and transport, traffic police, urban planning consultants, businesspeople, taxi operators, religious, cultural and political leaders. In eight months, the first batch of 400 buses will arrive in Uganda.

With time, 980 buses should ply major roads. They were all quick to rally behind the Tondeka Metro, a mass transit bus service system that uses advanced technology to ease the life of commuters.

How Tondeka Metro will operate
Transaction advisors, Ortus Africa Limited say Tondeka Metro will begin operations in Greater Kampala Metropolitan area, within a distance of 25 kilometres on all major roads leaving the city.

Initially, on Masaka Road, the buses will travel as far as Nsangi, on Jinja Road as far as Mukono, on Mityana road as far as Buloba as well as Gayaza, Wakiso and Matugga on Bombo Road. Uganda Development Corporation (UDC) will provide funds to deliver the buses.

“The resources are from the government of Uganda. It is supposed to be funded through a loan by Exim Bank of India but the discussions are not yet concluded. Currently, it is the Ministry of Finance handling that and the total amount will be determined at that point. For now, the working figure for the total investment is about $160m (about Shs590b),” Mr Patrick Birungi, executive director UDC says.

The buses will ply the routes for a fee to ensure UDC recovers its money. Tondeka Metro should also be able to pay workers and service providers and be maintained.

“We are projecting operation capacity to be at 95 per cent all the time. Money will be collected through a cashless system; so users will buy cards and swipe every trip. The money that goes off the card will go into an escrow account maintained by the project company. Out of that money, UDC will pay for the buses and whoever else is in that line will receive their share,” Ortus Africa Limited’s Dorothy Kabugo explains.

The projection is that UDC should recover its money within three to four years. Once that is achieved, the company will undergo an Initial Public Offering (IPO), a process by which a private company opens up the sale of its stocks to the general public.

“Most startups find it difficult to raise financing from commercial sources and at times shareholders’ equity is not adequate. This is always due to the fact that private investors may not be willing to give a fair value of the business venture in its early stages. In this case, it makes a lot of sense to seek equity investment through an IPO .While for Tondeka, that may not come through right away, but it is a very strategic direction that they are planning to take,” managing director Alpha Capital Partners Stephen Kaboyo says.

He also believes that another critical benefit that the Tondeka Metro will gain is winning over the support of the existing private stakeholders with different interests.

“Incorporating them through a public ownership model, the small, stand-alone operators who are the majority will automatically be part of the venture by sharing financial gain and this will have tremendous impact on the public image of the new business,” Mr Kaboyo explains.

Indian company, Ashok Leyland, will supply the buses which will be initially owned by UDC. Local company Tondeka is working alongside government and it will manage the operations. A few highly skilled expatriates will be hired to transfer skills to Ugandans.

“Our public system in Kampala is not public enough because public means regular, safe, available, reliable and predictable. The current system demeans human integrity and enforces leakages in the economy,” Ms Amanda Ngabirano, transport and traffic management advisor says.

Potential if it takes off
More money is said to remain in the pockets of Ugandans as the monthly commute will cost at least Shs55,000.

“Those who have been spending a lot on transport can now divert that money to other investments,” Mr Peter Kimbowa, chairman Tondeka Metro, says.

The Tondeka Metro has the capacity of creating about 20,000 jobs and existing operators must adjust with the changes.

“We are ready to support this bus system to develop our city. We have an issue of driving permit; our drivers must be given special training so that they can graduate to driving buses.
Our job is to protect interests of drivers, conductors and taxi owners. We shall not allow jobs to be given to expatriates when we locals can do them,” Mr Mustafa Mayambala, chairperson Uganda Transport Development Agency (UTRADA) says.

“Also, this project is here but there is the issue of operators who have bought taxis on loans. It must be handled with care not to hurt people’s business.”

Mr Andrew Kitaka, acting executive director Kampala Capital City Authority (KCCA), says there is willingness to discuss the matter on loans and there will be a meeting to find modalities to clear any such debt.

According to Mr Kimbowa, President Museveni’s directive states that taxi operators participate in the mainstream project as drivers and support staff at more than 80 terminals to be created.
Also, taxi owners should own part of the company by buying shares and buying personal buses.
Government has particularly highlighted the pitfalls it faces in its bid to collect funds due to it. The cashless ticketing is expected to promote accountability and inform the same on whether the project will be a viable investment in the long-term.

“As Mukono, we used to receive Shs400m from taxi operators annually and this money enabled us to run our town. We have not received any money in five years because taix operators are unable to collect and give us that amount in the current economic environment. As Local Government, we are excited because we expect to start receiving money from the buses,” Mr George Kagimu, mayor Mukono Municipality says.

There were several calls to let Ashok Leyland sell its buses but create opportunity for Uganda in this supply chain in the long term.

“We are already working with Kira Motors to pass on technology to them and the first locally assembled buses will be in two to three years,” Ashok Leyland’s Stephen Mwanje says.

Challenges
A mass bus transit service is not new for most that have plied the city’s roads as can be evidently seen through the operations of Pioneer and Awakuula Enuume buses.

Current infrastructure designs are seen as a hindrance to a mass bus transit service and if the buses arrive, they would have to compete with huge trucks, pedestrians, private cars, bicycles, boda bodas and commuter taxis. KCCA, however, insists it will provide infrastructure to support the service.

“We shall start with what we have but there will be progressive improvement maybe in about three years,” Mr Kitaka says.

“We have a grant of Shs86b to improve traffic junctions in the city. We are starting in April and we shall integrate intelligent transport so that a bus does not spend too long at a junction.”

Serious concerns have also been raised about the cashless payments and whether Ugandans are ready to swipe given the traditional use of hard cash. Passengers will have to top up at authorised agents or make use of mobile money off any telephone network.

“We are ready. Mobile money is a leapfrog development. It is about making it easy for people to use; so if you need to design a product, put in mind the customer journey. If I go to a bus to pay, I should not dial a USSD code, let me tap, pay and go,” Mr Ali Monzer, MTN Uganda acting general manager Mobile Money services, says.

Why it might not take off

Infrastructure designs. A mass bus transit service is not new for most that have plied the city’s roads as can be evidently seen through the operations of Pioneer and Awakuula Enuume buses.

Current infrastructure designs are seen as a hindrance to a mass bus transit service and if the buses arrive, they would have to compete with huge trucks, pedestrians, private cars, bicycles, boda bodas and commuter taxis. KCCA, however, insists it will provide infrastructure to support the service.

“We shall start with what we have but there will be progressive improvement maybe in about three years,” Mr Kitaka says.

“We have a grant of Shs86b to improve traffic junctions in the city. We are starting in April and we shall integrate intelligent transport so that a bus does not spend too long at a junction.”

A transport system that works
As government works towards operationalising this mass transit service, experts shared an array of issues such as frequency have to be considered because it is what attracts numbers to the buses.

“Bring enough buses so that they can transport people in peak and off peak times. Statistics show that taxis cause 22 per cent of the traffic jam in Kampala while 78 per cent is caused by private cars. We need a project that reduces taxis and private cars in the Central Business District. Let us create park and rides to encourage a percentage of private car owners to use public transport,” Mr Fred Senoga, a transport consultant, says.