HomeOpinion & AnalysisRBZ Should Focus On Core Business

RBZ Should Focus On Core Business

THE article in the Herald, September 30, on the RBZ forming a public transport company leaves a lot to be desired.

 

I respect and commend the RBZ governor, Dr Gideon Gono, on the initiatives he is taking to improve not only the public transport system in Zimbabwe but other sectors of the economy.

However, I question the rationale, planning and strategy used in developing and implementing the public transport company taking into consideration that the market is one.

We do not need a second rival from the same owner, being the state in this case.

This company will simply be a duplication of roles. The Zimbabwe United Passenger Company (Zupco) already serves this purpose.

Public transport has traditionally been defined as any transport system in which passengers do not travel in their own or private vehicles.

The companies are normally owned and controlled by municipalities or the central government.

A public transport system usually consists predominantly of rail and bus services that are subsidised by the government at local level or national and the mini-bus taxi services, which are unsubsidised.

These three modes do not work in an integrated fashion and usually compete with one another for commuters. In some cases this competition has led to price cuts and price wars.

A public transport service needs to provide more than a peak-hour commuter service, with a limited off-peak service.

It needs to provide an affordable, comfortable, efficient and reliable service throughout the day. An ideal public transport service should be comparable to private-vehicle use and not be seen as an inconvenience of last resort.

Thus we are clear that the economics behind a public transport system is it provides commuters with an efficient, reliable, affordable, comfortable and safe mode of transport at a subsidised price.

It does not mean that public transport companies should operate at a loss. It means they should operate and be able to sustain the system and make a profit, which we might want to term a surplus.

We all know that the transport sector either private or public is an integral sector of any given economy. Indirectly it adds value and provides a service to people.

As a result, it needs proper developing, planning, strategising and implementation in order to deliver good service.

Once again the idea is a noble one besides the fact that it’s a duplication of the already existing Zupco.

It has its merits and the competition it will give to Zupco is healthy. My worry though is the economic sense in how they want to operate the company.

There is no proper public transport planning and strategies for the long-run of these companies.

Has Gono taken his time to look at why after we inherited Zupco then known as the United Omnibus Company from the Rhodesian government, Zupco has failed to provide a reliable service and operate efficiently?

Zupco used to have the largest fleet in the country in the 80’s and early 90’s providing a service to both urban and rural areas, but look at it now.

Is Gono not just creating another Zupco with a different name but putting the burden on the tax payer who will have to fund the project?

Transport is a very tricky industry. With fuel and oils constituting 33% of running costs, it makes it a delicate business to venture into especially if that is not your core business and the fact that we import fuel makes it a risky line not to talk of the spare parts and other related costs.

Operations and productivity of the transport sector make it as difficult like any other service industry to manage.

Marginal revenue has such an impact on the marginal costs, thus with every additional revenue your running costs are reduced.

In layman’s terms this is with every additional bus you operate, giving additional revenue, your operating cost is reduced and thus you can reduce your fares.

This is assuming everything is normal and stable. Numbers in the fleet play an important part in reducing operating costs, both fixed and variable. With say 10 buses per city or province and charging 70% of what Zupco is charging now, the company will do well.

Zupco is currently in trouble because their fares are way too low. The company cannot break even on that. Zupco claims it has made profits, which is not true, because they have failed to buy spare parts.

Most of their buses are off the road.This is because of their costing and replacement value of the fleet, which they failed to take into account when costing for fares per kilometre.

I am not deliberating on Zupco, but about the rationale of the RBZ setting up a public transport company as its subsidiary. By setting up this new company, the RBZ is in fact admitting that Zupco has failed to deliver a transport service to the public.

Has the RBZ taken time to look at Zupco’s mistakes?

They should then use that expertise to help rescusitate Zupco.

There is no need to form another public transport company at this juncture. Instead, expertise and resources should be channelled into Zupco. Take note of the following:

*Identify and investigate problems the company had in relation to strategy, policy, markets, and organisational structure, management style.

*Formulate recommendations and implement lasting actions and solutions.

*Ensure successful development of strategies, selection and implementation.

*Involve business modernisation.

*Design and manage a service enhancement programme that meets and exceeds customer satisfaction.

Zupco is capable of providing this service and of even making profits in the long-run.

The governor should revisit the issue and consider giving Zupco a capital injection, but only after addressing some of the areas mentioned.

By Collen Ngundu

 

 

 

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