1. travel
2. transports
3. public transport

CITY OF JOHANNESBURG
FINAL DRAFT
METROBUS BUSINESS PLAN
(start date: July2014)
MAY 2013
TABLE OF CONTENTS
SECTION 1: INTRODUCTION........................................................................................................ 4
1.1
ROLE OF BUSINESS PLAN ...................................................................................................... 4
1.2
CONTEXT AND BACKGROUND .............................................................................................. 4
1.3
ROLE FOR METROBUS ........................................................................................................... 6
SECTION 2: APPROACH TO METROBUS BUSINESS PLAN ...................................................... 7
2.1
APPROACH TO OPERATIONAL PLAN AND DETERMINATION OF ROUTES ............................. 7
2.2
APPROACH TO INSTITUTIONAL RESTRUCTURING................................................................. 8
2.3
APPROACH TO BUILDING FINANCIAL MODEL ..................................................................... 10
SECTION 3: ROUTES.................................................................................................................... 11
3.1
CURRENT SITUATION .......................................................................................................... 11
3.2
PROPOSED REVISED AND NEW ROUTES ............................................................................. 11
3.3
PHASE 1B AND 1C OF REA VAYA ......................................................................................... 12
SECTION 4: BUS OPERATIONS .................................................................................................. 14
4.1
CURRENT SITUATION .......................................................................................................... 14
4.2
PROPOSED CHANGES IN BUS OPERATIONS ........................................................................ 15
4.2.1
PROPOSED FREQUENCIES AND HOURS OF OPERATION .................................................... 15
4.2.2
CAPACITY REQUIREMENTS AND FLEET SIZE (NEW AND OLD BUSES) ................................. 15
4.2.3
PROPOSED PASSENGER NUMBERS ..................................................................................... 15
4.3
BUS KILOMETRES ................................................................................................................ 15
4.4
INFRASTRUCTURE AND DEPOT IMPROVEMENTS FOR MORE EFFICIENT BUS OPERATIONS
16
SECTION 5: BUSES ...................................................................................................................... 17
5.1
INTRODUCTION .................................................................................................................. 17
5.2
REFLEETING ......................................................................................................................... 17
5.3
NEW BUS SPECIFICATIONS INCLUDING UNIVERSAL ACCESS .............................................. 17
5.4
FUEL SOURCE FOR NEW BUSES........................................................................................... 18
5.5
BUS BRANDING AND EXTERNAL ADVERTISING................................................................... 19
SECTION 6: IMPLEMENTING THE TRANSITION ..................................................................... 20
6.1
INTRODUCTION ................................................................................................................... 20
6.2
FUNCTIONS THAT WILL BE TAKEN OVER BY THE SSMA ...................................................... 20
6.2.1
FARE MANAGEMENT .......................................................................................................... 20
6.2.2
MARKETING AND COMMUNICATION .................................... Error! Bookmark not defined.
6.2.3
BUS MANAGEMENT ............................................................................................................ 21
6.3
SERVICES TO CONTINUE TO BE OPERATED BY METROBUS ................................................ 22
6.3.1
BUS SERVICES ...................................................................................................................... 22
6.3.2
MAINTENANCE AND TECHNICAL SERVICES ........................................................................ 22
6.4.
HUMAN RESOURCES ........................................................................................................... 22
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6.4.1
HUMAN CAPITAL STRATEGY ............................................................................................... 22
6.4.2
REMUNERATION AND BENEFITS ......................................................................................... 22
6.4.3
PERFORMANCE MANAGEMENT ......................................................................................... 22
6.4.4
HUMAN CAPITAL PLANNING............................................................................................... 23
6.5
CHANGE MANAGEMENT AND MOVING TO THE TRANSITIONAL ARRANGEMENT ............. 23
6.5.1
CHANGING THE SDA BETWEEN METROBUS AND THE CITY ................................................ 23
6.5.2
HUMAN RESOURCE CHANGE MANAGEMENT .................................................................... 23
6.5.3
ACCOMMODATION IMPLICATIONS .................................................................................... 24
SECTION 7: FINANCIAL MODEL AND APPRAISAL ................................................................ 26
7.1
INTRODUCTION .................................................................................................................. 26
7.2
FINANCIAL MODEL ............................................................................................................. 26
7.2.1
REVENUES (FARES AND ADVERTISING) .............................................................................. 26
7.2.2
COSTS .................................................................................................................................. 28
7.2.3
SSMA COSTS ........................................................................................................................ 29
7.3
FINANCIAL APPRAISAL ........................................................................................................ 30
7.3.1
INCOME STATEMENTS ........................................................................................................ 31
7.3.2
CASH FLOW STATEMENTS................................................................................................... 32
7.3.3
BALANCE SHEETS ................................................................................................................ 32
7.3.4
CONCLUSION....................................................................................................................... 33
SECTION 8: TIMEFRAMES AND ASSUMPTIONS ..................................................................... 34
8.1
PROPOSED TIMEFRAMES .................................................................................................... 34
8.2
CRITICAL ASSUMPTIONS FOR SUCCESS.............................................................................. 34
ANNEXURE 1: MAP OF PROPOSED ROUTES ........................................................................... 35
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SECTION 1: INTRODUCTION
ROLE OF BUSINESS PLAN
1.1
The Executive Mayor, Cllr Parks Tau in his State of the City Address on 9th May 2013 committed
to provide five rights to the residents of Joburg including the “right to a spatially integrated and
united city”.
He said, “Over the decade we will introduce transport corridors connecting strategic nodes
through an affordable and accessible mass public transit that includes both bus and passenger
rail” and later he labled these “corridors of freedom”. He said that these corridors of freedom
“will mobilise the dynamic energy of this city, connecting important strategic nodes such as
Rosebank, Inner City, Sandton and township CBD’s to each other.
This business plan sets out how Metrobus can play an important role in the development of
Transit Orientated Development and achieving the “corridors of freedom”. It also intends to set
Metrobus on a new path of “developmental service delivery” where both Metrobus management
and workers can begin to be able to provide its passengers with a higher quality of service,
greater reliability and frequency of buses.
The business plan arises out of a 7th March 2013, the Mayoral Committee decision which after
deliberating on the future options for Metrobusresolved as follows:
1. That Group Governance proceed to put in place the relevant measures to change the SDA
between Metrobus and the City to enable Metrobus to have a management contract with the
Scheduled Services Management Agency to offer scheduled services in respect of an agreed
operational plan and report back to the Mayoral Committee in this regard and to seek relevant
approvals.
2. That the process of developing an operational and business plan for Metrobus be noted and
that such plans will be presented to the Mayoral Committee for approval by May 2013”
This Business Plan sets out:
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
1.2
An interim operational plan which can better respond to the present public transport
reality and maximise the role of Metrobus on identified corridors;
The refleeting programme of between 125 and 175 new buses including how
requirements for the new buses to maximise job creation through local content and
using alternative fuel sources will be achieved;
An new division of roles and responsibilities based on the fact that Metrobus will have a
management contract with the City to provide bus services and the consequent new
institutional model in this regard including the change management process to achieve
it;
A financial model and appraisal; and
Timeframes for implementation.
CONTEXT AND BACKGROUND
Metrobus has been in existence since 1942. As part of the eGoli process in 2002, Metrobus
become a Municipal Owned Entity with a Board and a Service Delivery Agreement with the City.
Historically Metrobus has served “white Johannesburg” although today the majority of its
passengers are black.
Below is a brief chronology which sets out the important milestones which brings us to where
we are today:
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DATE
2002
2006
2004 and 2007
June 2006
October 2006
August 2009 to January
2011
2010/11
January 2011
May/June 2011
August 2011
October 2011
MILESTONE
Metrobus procures 100 Volvo double decker buses and 50 Volvo
single decker buses for 2002 World Summit on Sustainable
Development. The procurement is through an INCA Loan which
takes 12 years to repay at very high terms.
Metrobus procures 70 more buses.
Metrobus experiences two long protracted strikes which impacts
negatively on patronage
Metrobus introduced a route in Soweto but meets resistance from
the taxi industry and Putco
PUTCO seeks to take City to court on proposed Metrobus routes to
and from Soweto. City reaches out of court settlement which
restricts Metrobus to 22 buses from the Protea area.
Metrobus manages the interim bus operating company, Clidet, set up
to initiate the first ever full bus rapid transit system (Rea Vaya BRT)
in South Africa and Africa. This is done successfully although a
number of experienced members of Metrobus leave after January
2011 to join the Rea Vaya BRT project.
Transport Department does extensive study to determine an
appropriate future option for Metrobus. It proposed that Metrobus is
reorganised along the lines of Rea Vaya BRT and that this process
should take a period of five years.
Mayoral Committee agrees that consultation with various
stakeholders including organised labour on the proposed future
option can proceed. However due to a labour strike in March 2011
and the upcoming local government elections, consultations are not
concluded.
A new Mayoral Committee is appointed after local government
elections led by Executive Mayor, Parks Tau. The Executive Mayor
initiates an institutional review process including in respect of the
Municipal Owned Entities (MOE).
Mayoral Committee agrees on first level Institutional Review but in
respect of Metrobus instructs MMC Transport to bring a proposal
based on the future options study conducted in 2010.
Mayoral Committee deliberates on Metrobus future options report
where four options are presented including to continue as before,
close Metrobus down, unbundle over more than 3 years or unbundle
over one year.
Mayoral Committee resolves that:
“1.
The preferred option for the future of Metrobus is to unbundle
Metrobus within one year and embark on a procurement process with
the objective of entering into a gross fee per km bus operating contract
with more than one external operator.
2.
The Transport Department proceeds with the development of
the necessary detailed planning and steps necessary to comply with
legislation.”
November 2011 to
January 2013
MMC for Transport sets up Steering Committee including the chair of
the Board to oversee implementation of Mayoral Committee decision
and do necessary consultation with stakeholders. Legal steps
determined by Transport Department which identify that a longer
period than one year is required. Consultations take longer than
expected.
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DATE
January 2013
7 March 2013
11 April 2013
1.3
MILESTONE
In the meantime, Metrobus buses continue to age and breakdown.
Metrobus is forced to take up to 50 buses out of operation because
they are too expensive to maintain and cut trips as a result.
Transport Department proposes new process to the Executive Mayor
to be able to address impasse in the restructuring process and also
enable refleeting of Metrobus
Mayoral Committee approves that City can purchase buses for
Metrobus to operate on condition that the buses using alternative
fuel sources and maximise local content and that a new operational
and business plan is prepared. The business plan is to focus on a
phased approach to the final institutional form of Metrobus, the first
phase being Metrobus having a management contract with the
Scheduled Services Management Agency in the Transport
Department.
Mayoral Committee further deliberates on how to maximise job
creation, energy efficiency and a low carbon emission producing fuel
in respect of the choice of fuel for the Metrobus refleeting
programme. The Mayoral Committee approved “that the tender for
new Metrobuses is a tender for a turnkey solution including buses and
for fuel that must be green and job creating and that the tender
evaluation process determine the most economical, environmental and
job creating option.”
ROLE FOR METROBUS
In 2011, the City of Joburg agreed on a GDS strategy which aims to make walking, cycling and
public transport the mode of choice by 2040. Thus the role of public transport going forwards is
going to increase.
The Transport Department is presently working on an Integrated Transport Plan which will
inter alia include an Integrated Transport Network which based on the 2012/13 data and with
future scenarios be able to determine which is the most appropriate mode on different routes.
This Integrated Transport Network will identify a role for rail, BRT and conventional bus.
Metrobus can become the key operator on routes identified for conventional bus but not in the
state that it is currently in with ageing fleet, outdated fare collection system and low levels of
labour stability.
Thus this business plan is a plan of how Metrobus can become restructured in the short term to
position itself as the main mode for conventional bus within an integrated public transport
strategy.
This business plan is based on a 12 year horizon since this should be the lifespan of a
conventional bus and because this is the maximum length stipulated in the NLTA for a
negotiated or tendered bus contract. However, it is envisaged that after the Integrated
Transport Network is finalised and after there has been a successful transition to becoming a
scheduled service under the Scheduled Services Management Agency, the business plan can be
revised and a new business model developed for the final institutional form of Metrobus.
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SECTION 2: APPROACH TO METROBUS BUSINESS PLAN
2.1
APPROACH TO OPERATIONAL PLAN AND DETERMINATION OF
ROUTES
The Mayoral Committee agreed that Metrobus needs to develop a revised operational plan
which should seek to:








“Continue to serve the 90 000 existing passengers;
Optimise integration and alignment with Rea Vaya, Gautrain and Metrorail and support
the IDP priority project of Transit Orientated Development;
Strengthen public transport corridors, especially in areas of high private car use and link
residential areas to economic nodes;
Extend existing services to new areas of ‘captured car users’ in South/North/North
West;
Improve frequency, reliability and off peak services;
Reduce dead kilometres and maximising use of existing depots;
Incorporate scholar transport services currently provided and potential to provide; and
Explore potential to receive a portion of Provincial Government bus subsidies.”
Taking into account the above objectives, the following steps were undertaken in coming up
with the revised operational plan.
Firstly the strategic objectives of the City as spelled out in the Spatial Development Framework
and Vision 2030, were taken into consideration and the following principles followed:
 Channelling public transport routing into more focused, high frequency corridors, rather
than the present dispersed, less frequently serviced route structure.
 Provision of access between residential areas and the major economic nodes, and significant
decentralised nodes, as well as between the nodes themselves.
 Improvement of access to captive users and attraction of non-captive users to the network.
 Provision of a safety net to basic services to the poor, ensuring access to the closest
employment centres, health and education facilities, shopping and other social services.
 Alignment of services to the proposed strategic public transport network. Other bus
services largely serve the south-western areas of CoJ, linking these broadly to the southeast. Metrobus routes should be more focused on the north-south and east-west grid of the
routes.
Secondly, in respect of data collection and analysis, data was collected on the number of trips,
number of passengers and number of buses for each of the Metrobus routes, including the
contracted routes.Using this information, a workshop was held with the operations and
planning personnel from Metrobus where each route was reviewed with the view of assessing
whether the route should be maintained, extended or cancelled, as well as estimating the
number of buses required given the passenger demand and ridership on the route. Possible
integration and alignment with Rea Vaya and Gautrain were also discussed and
recommendations made. Through this process routes, existing routes were assessed and 10 key
routes to be called “MB routes” identified. These routes will operate on regular frequencies and
will link with Rea Vaya and Gautrain stations and other key business nodes.
Thirdly, a map of all the Metrobus routes was drawnon which ReaVayaPhase 1A and 1B were
superimposed. By physical observation and taking into account recommendations from the
workshop, perceived demand in high volume settlements, and route recommendations made in
the ITP document of 2003, final routes were proposed with the view of:
o Serving high demand areas which were previously not being served.
o Promoting linkages with ReaVaya and Gautrain.
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o
o
Improving existing coverage on certain routes by re-routing them to places with
perceived higher demand.
Improving passage through the CBD which is currently the central point for most
routes.
These routes are described in the later section in two categories - key MB or primary routes of
which there are 10 and further secondary or feeder routes.
Finally using the revised map of Metrobus routes, and taking into account the target peak hour
frequencies along all the routes and the route turnaround times,the number of buses required
and the bus KMs per day were determined through a scheduling process.
We are cognisant that not enough time was allocated to the route rationalization exercise and
limited information was used to carry out a mini-review of the current Metrobus routes. A
detailed study will still need to be carried out taking into account: (i) the Household Travel
Surveywhose outcome is expected in the next two months, (ii) the revised Strategic ITP
Framework, and (iii) a census of all the current routes to establish peak demand. We believe this
detailed study will be able to produce the following outcomes which we could not achieve with
the limited analysis that we carried out:
 A complete review of the current Metrobus routes with the view of increasing frequencies
along the MBs as identified in the ITP and reducing service along the minor routes, possibly
handing over some of these routes to the taxis so that they can operate as feeder routes to
the main MBsThe idea of the MB routes was to increase frequencies along these routes as
they are deemed to provide linkages with major economic nodes and other operators,
particularly Gautrain.

Detailed changes to the operational layout of Metrobus routes including decentralization of
route origins from the CBD to other high demand economic nodes such as Rosebank and
Midrand, and introducing additional transfer points. This will go a long way in decongesting
the CBD and increasing bus frequency along the routes.
It is proposed that this be done between the time that the Business Plan is approved and the
transition to the Scheduled Services Management Agency occurs.
2.2
APPROACH TO INSTITUTIONAL RESTRUCTURING
The Mayoral Committee report of 7th March 2013 proposed that the “change process be
incremental with a transitional phase where Metrobus operates according to a new operational
plan in terms of a management contract with the Scheduled Services Management Agency
(SSMA).”
The SSMA has been established in the Transport Department to contract manage all scheduled
services in the City and which is presently managing the Rea Vaya BRT Phase 1A service.
The Mayoral Committee decision was “based on the assumptions that we should move on one
hand to routes being determined by the City and to a single model of the provision of public
transport services as envisaged in the Rea Vaya model and as envisaged in the institutional
review with the establishment of the SSMA.
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During this transitional stage the final institutional form is determined. The table below sets out
the envisaged differences between the status quo, transitional phase and final institutional form.
Components of bus Status quo
services
Bus ownership
Owned
Metrobus
Transitional
Final form
by Owned by City
Tbd. Could continue to
be owned by City or
could be owned by
private operators
Bus services (driving Metrobus
Metrobus
management Transport Department
the buses on
employed drivers contractor to SSMA.
determines
routes
scheduled routes)
on
routes Transport
Department which are prescribed
determined
by determines routes which to Metrobus via SSMA
Metrobus
are
prescribed
to
Metrobus via SSMA
Bus management
Metrobus
SSMA through control SSMABus contractor
management
centre (3rd floor JRA)
tbd
Metrobus as part of
management contractor
Fare
Metrobus
SSMA – integrated system SSMA – integrated
management
with contract with with Rea Vaya BRT, SMMA system with Rea Vaya
and collection
Questek
collects revenue and pays BRT, SMMA collects
Metrobus fee per km to revenue and pays
run bus services.
Metrobus or private
bus
operating
company/s a fee per
km to run bus services.
Depots and sleeping Metrobus owns
Metrobus owns as part of Tbd – could continue
grounds
management contract
to rent depot space
from City
Maintenance
of Maintained
in 3/5 year maintenance Tbd
but
mostly
buses
house.
contract in respect of new outsourced
buses.
maintenance for first 5
In house maintenance as years.
part
of
Metrobus
management contract
Metrobus could create
a technical centre of
excellence for vehicle
maintenance at one or
more depots.
Ensuring patronage Metrobus
SSMA
SSMA
(marketing,
passenger
information)
Governance
Metrobus Board
Metrobus Board would Tbd
continue
to
manage
management contract with
the City. Would require
change in SDA between
Metrobus and the City
As set out above, two phases of institutional reform are proposed:
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

2.3
The first ‘transitional’ phase is for Metrobus to sign a management contract with the City
(or change their SDA with the City); and
The second phase is to determine the final institutional form which will need to be
subject to a Section 78 of MSA investigation.
APPROACH TO BUILDING FINANCIAL MODEL
The approach to the financial model was informed by the understanding of the objectives
Metrobus and the Operational Plan. The following process was adopted in developing the
model:
 Obtaining and understanding of the requirement for the financial model for the project
life-cycle;
 Obtaining the base data and the underlying drivers for forecast financial and economic
performance;
 Engineering the engine of the financial model;
 Stress-testing and review of the financial model;
 Corrections/adjustments and conclusion.
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SECTION 3: ROUTES
3.1
CURRENT SITUATION
Metrobus operates both apeak and off-peak service, as well as a weekend service. The buses are
often full or overloaded during peak periods. The bus fleet comprises 451 buses, 163 doubledecker and 288 single-decker buses. It operates a total of 1,941departures per day. Its loadings
average 80,000 passengers per day. Metrobus is currently operating at an average frequency of
15 minutes during peak on its busiest routes such as Rosettenville to Johannesburg Hospital.
Metrobus operates numerous routes that are classified into the following categories:
 Service routes which are open to the general public.
 Scholar routes which target scholars in different locations. These routes start or end at
or near schools. Currently there are more than 80 scholar routes
 A disability service in the following areas: Kagiso, Eldorado Park, Turfontein, Orlando
East, Hope School, Meadowlands, Diepkloof, Riverlea, and Parkview.
 Contract routes - There are currently seven contracts where Metrobus provides
exclusive service to specific institutions such as private schools and corporations.
 Social service routes:
o Slovo Park/Freedom Park Settlement to all the Pimville Schools.
o Senior citizen routes in from the Western retirement villages.
The original routes and route structure for Metrobus were determined by the City. Over the
years, there have been new routes added, whilst some have been withdrawn and others
extended in response to passenger demand. Metrobus carries out a thorough investigation of
routes before proceeding to open, extend or withdraw a route.
3.2
PROPOSED REVISED AND NEW ROUTES
From the route review exercise that was carried out and in line with the approach set out in
section 2.1 of the document to align routes with the GDS and corridors of freedom, the following
new key MB or primary routes are proposed:
Route
MB1
Route Description
Liefde-en-Vrede→Haddon → CBD
→Parktown→Sandton→Sunning Hill
MB2
South Crest →Elands Park → South Hills
→ City Deep → Jeppestown→ CBD
Bellevue→ Highlands
North→Wynberg→
Alexandra→Woodmead→Midrand
MB3
Westgate→ Constantia→ Newlands→
Auckland
Park→Braamfontein→Jeppe→BezValley
→Eastgate
MB4
CBD→ Emmarentia/Greenside→
Cresta→ Laser Park
Notes
This will be the main corridor linking the
south and north of Joburg. Most east/west
routes will at some stage bisect this route.
This route also links the Gautrain stations at
Parktown, Rosebank and Sandton and Rea
Vaya in the CBD.
This will be the main route linking Joburg
with Midrand, another North South Route
that will link up with Gautrain stations via
the East West corridors discussed later.
This route will operate in two sections,
from the South to the CBD and from the
CBD to Midrand.
This Route is one of four east west routes.
The Route will link up with Rea Vaya at
various stations and will take passengers
further east and west from Rea Vaya
stations. The route will again be run in two
sections from Westgate to Braamfontein
and from Braamfontein to Eastgate.
The route has been changed from the
existing route through Auckland park to
now travel via Greenside. This provides
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MB5
CBD→Greenside →RandburgStrijdom
Park → Northgate →Kyasands→ Cosmo
City
MB6
CBD → Hyde Park → Randburg
→Fourways → Diepsloot
MB7
Flora Park→
Constantia→Cresta→Randburg→Sandto
nWunberg→Linbro Park
MB8
Wilro Park→Ruimsig→ Laser Park→
Northgate→Fourways Sunning
Hill→Woodmead
Sophiatown police station
→Greenside→Rosebank→ Highlands
North→ Lombardy East→
Longmeadow→Greenstone Mall
MB9
MB10
Protea Glen→ Moroka→ Orlando→ New
Canada→ Parktown
better access to areas not currently covered
by Rea Vayaand furthermore provides
easier access to the RosebankGautrain
station.
This route links Cosmo City with the CBD
and to other areas of Joburg via other MB
routes, Rea Vaya and the Gautrain stations.
The route has been extended to the North
and will now travel directly from Cosmo
City to the CBD.
This route links Diepsloot with the CBD and
to other areas of Joburg via other MB
routes, Rea Vaya and the Gautrain stations.
The route has been extended to the North
and will now travel directly from Diepsloot
to the CBD.
This east west route will link up Rea Vaya
Routes and key junctions to the East, as well
as provide a link between the Sandton and
Marlboro Gautrain stations.
This routes provides easy access along
Northern Suburbs and links up with the
main North South Routes listed above.
This route provides access along its path to
various south North routes and links up
with Rea Vaya in the west. Furthermore it
travels past the RosebankGautrain station
towards the South of Alexandra.
The main Soweto route will provide
commuters easy access to various Rea Vaya
stations and will link up with Rea Vaya and
the Metrobus MB3 route in Parktown.
The 10 MBroutes above were carefully structured to provide sufficient coverage of the NorthSouth and East-West traffic corridors, as well as linkages with Gautrain and Rea Vaya. TheseMB
routes will be serviced on regular intervals during peak and off-peak times and will allow
citizens of Johannesburg easy access to any area within the Metropolis, as well as easy access to
areas outside Johannesburg through services such as Gautrain.
In addition to the 10 Main routes identified, Metrobus will operate “feeder” or secondary routes
in 10 key zones in the City. Contract and school routes will either be included in the 10 MB
routes or will become secondary or feeder routes to the MB routes. Emphasis will be placed in
scheduling to minimise dead kilometrestravelled by buses.
As indicated earlier, it is proposed that these routes are refined and scheduled after a more
detailed study.
3.3
PHASE 1B AND 1C OF REA VAYA
Metrobus is an affected operator in respect of Phase 1B and most likely Phase 1C of Rea Vaya
BRT since it operates routes that in the future will be operated by Rea Vaya BRT. However
Metrobus unlike other affected operators can’t become part of the new bus operating
companies since section 93K(1) of the Municipal Systems Act prevents Municipal Owned
Entities from being part of other companies if there shareholding is less than 51%.
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In addition it would be a serious conflict if as per the Rea Vaya BRT model, the City of
Johannesburg is the shareholder of Metrobus and is also contracting with Metrobus to offer bus
services.
In respect of Phase 1B, Metrobus is affected by a total of 1595 seats which equates to about 14
buses. However if seat utilisation is taken into account this could decline by about 50%.
The Mayoral Committee made a decision on 16 August 2012, that Metrobuspotential
shareholding be ‘kept in reserve’ and not allocated to any other potential shareholder(s)
pending the final decisions on the future institutional form of Metrobus and that until such time,
Metrobusshould attends the Rea Vaya Phase 1B negotiations as observers.
The Mayoral Committee still has to make a final decision about what would happen to the seats
allocated to Metrobus but for purposes of this business plan, no services have been anticipated
on the Phase 1B Rea Vaya routes.
In respect of Phase 1C, it is anticipated to be operational in 2016. This is still some time away
and Metrobus needs to continue to service commuters on these routes. These services have thus
been included in the business plan. It is possible in 2016 to either redirect the services to other
routes or reduce services and retire further old buses without replacing them.
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SECTION 4: BUS OPERATIONS
4.1 CURRENT SITUATION
Buses
Metrobus has a fleet of 451 buses which are aging. The table below indicated the average age of
the existing Metrobus bus fleet.
Depot
Milner Park
Roodepoort
Village Main
Total
6 to 10 yrs
68
59
127
Number of buses
11 to 16 yrs
17 to 20 yrs
80
49
59
7
59
54
197
110
>20 yrs
11
6
Total
208
72
171
451
17
The last buses purchased by the company were bought some seven years ago. As indicated in
the table, the bulk of its current fleet is between 11 and 20 years old whereas the estimated
useful life of a bus is 12 years. This has led to high operational and maintenance costs for the
fleet as well as numerous cancellations of trips, leaving passengers stranded. Currently there
are 49 buses which are out of service
Depots
There are three main depots which are further complemented by satellite depots and sleeping
grounds as tabulated below:
Main Depot
Milpark
Village Main
Roodepoort
Satellite Depots
Fordsburg
Soweto
Eldorado Park
-
Sleeping grounds
Zondi
Ferndale
Eldorado Park
-
Current Patronage
The current patronage was estimated by looking at average historical initial boardings for each
of the Metrobus routes and escalating by 10% to take into account system pilferage due to nonpayment, and by 20% to take into account transfers. The patronage is based on the initial
boardings recorded in the two year period ending January 2013. The relevant figures are set out
below
System Ridership
Initial boardings for 2 years
Estimated pilferage @ 10%
Estimated transfers @ 20%
Adjusted Initial Boardings for 2 years
Average annual initial boardings
Estimated daily passengers
Number of passengers
29,785,755
2,978,576
5,957,151
38,721,482
19,360,741
80,670
Page | 14
4.2
PROPOSED CHANGES IN BUS OPERATIONS
4.2.1 PROPOSED FREQUENCIES AND HOURS OF OPERATION
It is proposed that Metrobus continues to operates both a peak and off-peak service and that the
off peak services should be increased on key corridors. The morning peak will start at5.30am to
9am whilst the afternoon peak will start from 3pm to 6pm.The targeted frequencies will be 15
minutes in the peak and every 30 to 60 minutes in the off-peak.
4.2.2 CAPACITY REQUIREMENTS AND FLEET SIZE (NEW AND OLD BUSES)
To arrive at the proposed capacity requirements, the following key variables were used:
 Revised route structure
 Peak hour frequencies
 Route length
 Route turnaround time.
Using this information, it was determined that the required number of busesis 450 buses. The
breakdown of the buses is summarized in the table below:
Number of buses
175/125
276/326
175/125
New buses to be purchased
Old buses to continue in use
Old buses to be discontinued
See below for a further discussion on why the number of new buses is either 175 or 125.
4.2.3 PROPOSED PASSENGER NUMBERS
Taking into consideration the proposed changes to the routes and the number of buses that will
be in operation, an estimate of the number of passengers was made by assuming multiplying the
maximum possible capacity, given 6 peak period trips and 2 off peak trips per bus, by an
assumed level of occupancy. The outcome was annualized by multiplying by 248 working days
in a year. The calculation for year one is summarized in the table below:
Period
Avg. Bus Number
Capacity of Buses
Daily
frequency
Peak
Off-peak
Total
76
76
6
2
396
396
Maximum
Annual
Capacity
44,782,848
14,927,616
59,710,464
Average
Occupancy
50%
20%
Annual
Boardings
22,391,424
2,985,523
25,376,947
From the above table, the estimated ridership in year 1 is 25,376,947 boardings, which
translates to an average of 102,326 boardings per day. This represents a 26% increase from the
current average daily boardings which can be justified by:


4.3
Metrobus servicing a revised and leaner route structure at higher frequencies with
reduced distances and improved linkages to other public transport operators; and
A reduction in breakdowns and the need to take buses off the road for maintenance
following the acquisition of new buses.
BUS KILOMETRES
Bus KMs were estimated by multiplying the route length by the number of trips for each route.
The route lengths used in the calculations are inclusive of the dead KMs. Using this approach, we
arrived at an average of 14.3 million annual bus KMs. The bus KMs were split into 12.2
millionrevenue KMs and 2.1 milliondead KMs. These KMs take onto account existing school
Page | 15
routes as well as contracted services routes, but do not factor in private hires, which will only be
run on a profit basis. The summary of kilometres has been detailed below.
Summary of kilometres
Routes
MB Routes Weekdays
MB Routes Weekends
Secondary Routes
Contract Routes
Additional school routes
Breakdowns and in yard estimate (1%)
Total
4.4
Total active km
8 933 792
437 875
2 542 857
222 978
97 768
-
Total dead km
1 348 936
109 813
414 029
282 161
Total km
10 282 728
547 688
2 956 886
222 978
97 768
282 161
12 235 270
2 154 939
14 390 209
INFRASTRUCTURE AND DEPOT IMPROVEMENTS FOR MORE
EFFICIENT BUS OPERATIONS
The following infrastructure improvements are proposed to improve the speed of buses and to
reduce dead KMs:
1
Proposal
Public transport care
lanes
2
Sleeping grounds
3
Day time holding
Justification
Dedicated bus lanes are required within the CBD and on
major routes leading into and out of the CBD to make the
service more efficient and reduce turnaround times during
the peak periods.
In order to serve the Cosmo City, Diepsloot and Midrand
routes efficiently, at least two new sleeping grounds will be
needed in areas closer to these places. The Cosmo City public
transport facility will be explored as well as Pikitup sites.
Additional day time holding grounds will be identified to
safely hold buses during the off-peak to improve efficiency
and reduce dead kilometres.
Page | 16
SECTION 5: BUSES
5.1
INTRODUCTION
This business plan requires 450buses. Of these buses, between 125 and 175 may be new buses
and the oldest buses will be retired and auctioned. There will also be a larger reserve fleet
when buses breakdown and when they need to be maintained. Below we set out the details of
the bus refleeting programmes as well as what Metrobus will do to improve the condition and
energy efficiency of their existing fleet.
5.2
REFLEETING
To ensure uninterrupted service as well as service the proposed operational plan, the Mayoral
Committee determined thatMetrobus must be refleeted to the extent that it can offer a cost
effective and reliable service. This in turn requires that:
 Sufficient new buses to provide reliable services;
 Buses that are fuel efficient and have reduced carbon emissions;
 Maintenance costs be reduced through maintenance contracts with clearly assigned
obligations to suppliers;
 Modern bus and fare management systems are in place to properly manage the new buses,
provide high levels of management information and maximise on revenue;
129 buses are beyond their useful life and are not able to be repaired or maintained. This is
what motivates that a minimum number of 125 buses be procured. Metrobus is thus currently
going out for tender for between 125 and 175 new 79 seater buses with tender specifications
that provide for:
 maximisation of local content in line with the DTI (Department of Trade and Industry)
requirements;
 a three or five year maintenance agreement; and
 a turnkey solution in respect of an alternative fuel source (fuel for three years and refuelling
equipment at two depots)
Thus the tender has three parts to it, namely:
 The supply, delivery and maintenance of buses;
 The development, supply and delivery of fuel; and
 The installation and maintenance of fuel equipment.
These new buses will be operated from the Metrobus’sMilpark and Roodepoort depots.
These buses will be funded by either or a combination of the following sources: PTIS, EFF or
financing. The NDOT has indicated that PTIS funds are possible if a business plan is submitted
which is in line with the PTIS conditions and integrated transport planning. This is one of the
reasons for the urgent submission of the business plan.
In line with the new proposed model set out of in this business plan, the buses will be procured
by the City of Johannesburg and will be operated on by Metrobus through a change in the
Service Delivery Agreement between Metrobus and the City.
5.3
NEW BUS SPECIFICATIONS INCLUDING UNIVERSAL ACCESS
The specifications for thenew buses are as follows:

The buses will have a seating capacity of a minimum of 60 passengers and a maximum of 19
standing. Priority seating will be available for elderly and physically or mentally impaired
persons in the front of the bus. These seats will be clearly identifiable.
Page | 17






The engine will provide a minimum power of 180KW and approximately 900Nm of torque
at 1830m altitude or equivalent. The equivalent specifications apply to alternately fuelled
buses.
The transmission will be fully automatic.
The following dimensions of the bus will be required;
o Maximum length of 12.5m
o Maximum width of 2.6m
o Maximum height of 3.2m
Tenderers will be required to provide the fuel for the buses over a period of at least three
years. Tenderers will be required to supply all equipment needed to re-fuel the buses.
The bus specifications will include a supply of a completely knocked down chassis and local
bus body building to maximize local content or manufacture.
The buses will also provide a driver monitoring system to provide exception reporting or
information regarding acceleration, deceleration, engine revolutions and idling time.
It is anticipated that new buses will be delivered from February 2014 but the exact date will
only be known after the tender process is concluded.
5.4
FUEL SOURCE FOR NEW BUSES
Energy supply for the transport sector in Johannesburg is predominantly based on fossil
fuels. The problem with fossil fuels is that the supply is not unlimited and the burning of fossil
fuels contributes to air pollution and generates greenhouse gas emissions which are harmful to
the environment creating negative and potentially disastrous climate change events. For South
Africa as a whole there is a challenge of fuel security and we are severely impacted upon by
global developments and resultant impact on a rising and unstable fuel price.
It is mainly due to these reasons that a migration towards alternative sources of fuel such as
compressed natural gas, biogas or bioethanol is being proposed.
Compressed Natural Gas (CNG) has been extensively used in many countries as a well-known
alternative clean vehicle fuel there is currently an extensive natural gas link from Mozambique
to South Africa and there is further gas infrastructure being planned for the
country.Johannesburg is fortunate that it already has a gas reticulation network in some parts of
the city.
Biogas is a renewable energy which is formed when Methane is released from waste streams
such as solid waste and waste water. The Biogas once cleaned can be injected into a CNG
network and the two gases can be used seamlessly. There are opportunities to create Biogas
supplies through agricultural feedstock development, waste water treatment technologies as
well as solid waste treatment technologies.
The consumption of these vehicles seems to be on par with their fossil fuel equivalents. There
are drastically reduced emissions and the noise levels of the vehicles are also reduced.
Bioethanol is a fuel that is derived from specific crops such as sugar beet and grain sorghum.
Anethanol-driven bus was piloted by Metrobus during October 2010. The bus consumed 80
ℓ/100 km and produced 125 g of CO2 for every kilometer. An equivalent diesel bus uses about
48 ℓ/100 km, but produces about 1 285 g of CO2 for every kilometer.
Page | 18
The production of bio-ethanol can create significant job opportunities. For every bus that runs
on ethanol fuel, two to three jobs are created in rural areas. The South African Industrial
Biofuels Strategy however proposes that the market should work towards a bioethanol product
comprising of either 2%, 5% or 10% blended with petrol since this route is more fuel and cost
efficient.
Thus the busspecifications forthe new 125 to 175 buses do not limit a tender in terms of the fuel
source to be used. The only specification in this regard is that the bus must not be diesel
only. The main aims of using alternately fuelled buses are the creation of jobs and the lowering
of bus emission. Both these conditions have been included as part of the criteria in the tender.
Metrobus is also looking at how the existing fleet can be adapted to also utilise CNG/Biogas and
hence enjoy the benefits of the alternative fuel. Finally Metrobus is looking at a number of pilot
technology projects to improve fuel efficiency and reduce carbon emissions of the existing
diesel buses.
5.5
BUS BRANDING AND EXTERNAL ADVERTISING
There should be a similar brand and branding in respect of all quality public transport in the
City. The Gauteng Department of Public Transport and Roads also wants to see similar branding
across Gauteng under the banner or slogan of “Gauteng on the move”.
There have been proposals made that the Rea Vaya brand should be extended beyond BRT to all
forms of quality public transport such as Rea Vaya cycle or Rea Vaya Public Transport Facility.
However no decision has been made in this regard and there are equally strong views that say
Rea Vaya should only be associated with bus rapid transit.
It is thus proposed that the buses have similar external colours to Rea Vaya and that the liveries
inside the buses (seats etc.) are also similar. During the transition period under the SSMA, the
following is proposed:


New buses have Rea Vaya colours and outdoor advertising is allowed only on the back
of the buses; and
Existing buses continue with Metrobus colours and they can be advertised all over as
per existing situation.
Until such time as final decisions are made in respect of the Rea Vaya and Gauteng brand, the
new buses will be regarded as City of Joburg buses which are operated by Metrobus while the
existing buses will be regarded as Metrobus buses operated by Metrobus.
Page | 19
SECTION 6: IMPLEMENTING THE TRANSITION
6.1
INTRODUCTION
In the section 2.2, the approach to institutional restructuring was set out. Here we set out in
more detail what would be required of the functions that shift to the SMMA, the function that
remain at Metrobus and the change management process
The functions that will shift to the SSMA are:



Fare management
Marketing and communication
Inspection
In addition the SSMA will have to carry out bus management and createa time table for the
entire Metrobus service.
The functions that will remain at Metrobus are operating of buses and bus maintenance. It is
also proposed that Metrobus expand their function over time in respect of maintenance and
green refuelling and develop themselves as a centre of excellence in this regard.
This is discussed further below.
6.2
FUNCTIONS THAT WILL BE TAKEN OVER BY THE SSMA
6.2.1 FARE MANAGEMENT
For the successful transition of Metrobus to retain and attract new users along the proposed
routes, to integrate with other public transport services and for it be managed effectively on a
fee per km basis, new bus and fare management systems need to be introduced.
In line with the proposed institutional changes, the fare management system will be managed
by the Scheduled Services Management Agency.
The new fare collection system will be based on the following principles:







Cashless: In order to gain access to the Metrobus System, all commuters need to present
valid payment media at entrance and exit of the system. No cash will be accepted on the
bus;
Scalable: The Automated Fare Collection (AFC) System will be implemented to allow for
future growth of the system and minimize development costs and delivery times;
“Tap-On” and “Tap-Off”: Commuters will be required to tap-on when boarding and tapoff during alighting, irrespective if monetary and/or ticket value will be deducted during
tap-off. This will ensure that the operator has valuable origin/destination data for their
public transport network;
Minimum disruption to stakeholders: The AFC System shall be implemented in such a
way, so as to minimize the impact on all stakeholders, such as public transport operators
and passengers;
Flexible fare structure: The AFC System shall be easily customizable to over time move
from the staged approach currently in place at Metrobus to a distance based system
along the line of Rea Vaya BRT. The system will be able to integrate with Rea Vaya BRT
and with other modes going forward
Secure: All components in the AFC System shall incorporate robust and proven
mechanisms to secure all transactions. The integrity of data will be secured while
allowing for future integration between other operators;
Robust: The AFC System and its components will be proven, reliable, efficient and
similar in style and quality to existing systems used in high quality metro public
transport systems locally and worldwide;
Page | 20


Fast: The AFC System shall accommodate interaction between fare payment devices and
fare payment media to enable transaction speeds of 600 mille-seconds or less. ; and
Auditable: The AFC system shall be fully auditable
In summary, this fare collection system will use the legislated EMV based bank card for payment
of trips. It will also enable fare integration between different public transports modes, i.e. one
card can be used to pay for trips from different public transport providers. It will work on a
“tap-on” / “tap-off” fashion to facilitate distance-based fare collection.
It is proposed that the National Department of Transport be approached to fund the
introduction of this new fare collection system from the Public Transport Infrastructure and
Systems Grant due to the fact that a migration to EMV bank cards is a legislative requirement
and a significant step towards the national objectives of integrated ticketing. In the event that
this is unsuccessful, a financing strategy will need to be developed in consultation with City
Finance.
6.2.3 BUS MANAGEMENT
Bus management will take place via an Operations Control Centre managed by the Scheduled
Services Management Agency. The centre will be equipped with an Advanced Public Transport
Management System which inter alia will be able to track whether buses are on schedule and
where scheduled trips are indeed being serviced.
The bus controller at the centre will maintain constant communication with drivers of busses
that will not be on schedule or would have deviated from the prescribed schedule. The bus
controller will also liaise with JMPD in case of serious congestions for clearing.
The SSMA already has such a system in place for the Rea Vaya and it would be extended to the
Metrobus services.
6.2.2 MARKETING AND COMMUNICATION
All activities related to marketing or service promotion will be done by the Schedule Services
Management Agency (“SSMA”). The current Metrobus marketing team will be absorbed by
SSMA marketing department.
The following activities will be carried out by the SSMA:
What
Passenger information
Detail
This will include timetables and fares. Information will be
available on a website, through call centre, walk in centres
and private and public trip finders. Information will also be
available at all commuter shelters. Information will be
regularly updated.
Growing patronage
This will be done by marketing and communication
campaigns focused on the general public as well as targeted
areas and groups such as learners, shoppers etc.
External stakeholder relations This includes engaging and informing key commuter and
management
public transport stakeholder groups.
Customer care
This includes responding timeously to complaints including
through social media as well as providing information etc.
The walk in centres will also play a role in this regard
including for lost property and to address problems with
smart cards.
Customer satisfaction surveys
These will be carried out annually to get feedback on
customer issues and how performance needs to be improved.
Page | 21
6.3
SERVICES TO CONTINUE TO BE OPERATED BY METROBUS
Below is a summary of the service that will continue to be operated by Metrobus.
6.3.1 BUS SERVICES
Metrobus will continue to offer the following bus services:
 Provision of drivers who will drive the buses on routes that are scheduled by SSMA.
 Maintenance of a motivated and professional team of bus drivers so that there are minimal
service disruptions due to factors such as absenteeism, slowdowns, disciplinary action, etc.
6.3.2 MAINTENANCE AND TECHNICAL SERVICES
It is proposed that going forward Metrobus should:
 Continue to maintain its own fleet (focusing on the older buses only since new buses should
have maintenance contract for at least the initial years). Metrobus can also develop the
capacity to support the maintenance services of other City services such as Pikitup; and

Become a centre of excellence and innovation in respect of alternative fuels and fuel
efficiency conversions. Metrobus has participated in pilot projects on green fuels and can
become a pioneer in alternative fuels through the new fleet as well as adapting the existing
fleet by for example converting old diesel engines to bio-fuels engines. This project can be
extended to other diesel engines, not only used by buses but trucks as well.
6.4.
HUMAN RESOURCES
Critical to the successful implementation of the services to be continued to be operated by
Metrobus is the development a new human capital strategy.
6.4.1 HUMAN CAPITAL STRATEGY
The current Human Capital Management strategy will be reviewed to ensure total alignment
with the new Metrobus Business plan. This approach to be adopted will recognises that
employees are the company’s most valuable asset and focuses on developing employees’ skills,
knowledge and behaviours in order to maximise their contribution to the success of the
company. This in return will enhance Metrobus’ ability to attract and retain good talent.
6.4.2 REMUNERATION AND BENEFITS
The overall strategic aim of Metrobus’ reward management is to develop and implement the
reward policies, processes and practices required to support the achievement of the
organisation’s goals by helping to ensure that the company has the ability to attract and retain
competent, well-motivated and committed people.
The philosophy underpinning the strategy is that people should be rewarded for the value they
create. How the company remunerates employees will reflect the dynamics of the market and
context in which it operates. It will at all times align with the strategic direction and specific
value drivers of Metrobus and at the same time acknowledge our focus on building a high
performance organisation.
6.4.3 PERFORMANCE MANAGEMENT
A new performance management system will be developed linked to the organisation’s strategic
process, and therefore provides for the translation of the strategic plan into key performance
areas.Performance Management must support the implementation of the transportation values.
Page | 22
The process of performance management will incorporate the challenges that Metrobus
currently faces with regards to introduction of effective measures to deal with abuse of sick
leave and heightened efforts to improve productivity company-wide.
6.4.4 HUMAN CAPITAL PLANNING
Metrobus will ensure that effective human capital planning is in place to ensure that the process
of identifying the organisation’s human capital requirements and developing plans to ensure
those requirements are satisfied and motivated. This will ensure that right people, with right
knowledge, skills and abilities in the right numbers are in the right jobs, at the right time.
6.4.5 KNOWLEDGE MANAGEMENT
All employees will leave Metrobus at some point in time and many of them will take valuable
knowledge gained from experience and training with them. Metrobus will develop a plan to
ensure that accumulated knowledge, both technical and historical does not leave the
organisation when an employee retires or pursues other opportunities.
6.5
CHANGE MANAGEMENT AND MOVING TO THE TRANSITIONAL
ARRANGEMENT
6.5.1 CHANGING THE SDA BETWEEN METROBUS AND THE CITY
Once the business plan is approved, the City of Joburg Legal will appoint lawyers to make
amendments to the current Service Delivery Agreement with the City. The proposed changes
will need to be approved by both the Board of Metrobus as well as the Mayoral Committee.
Key changes that will be made to the SDA will include:



How the subsidy between Metrobus and the City will work
Change of functions of Metrobus
Clauses in respect of the new buses that will be owned by the City but operated by
Metrobus including in respect of insurance and other related risks.
In changing the SDA, reference will be made to the draft Bus Operating Contract Agreements
that exist or will exist between the City and the private Rea Vaya bus operators for Phase 1A and
1B.
6.5.2 HUMAN RESOURCE CHANGE MANAGEMENT
In the transition phase, a number of staff will need to be transferred from Metrobus to the City.
The estimated numbers in this regard are set out in the table below:
Section
Senior Cashiers
Cashiers
Inspectors
Special Services Clerk
Marketing Assistant
Call Centre Clerks
Switchboard Operator
Business Development Officer
Planning Manager
Schedule Assistant
Communication Officer
Total
Estimated number
3
11
13
1
1
8
6
1
1
1
1
47
Page | 23
Please note that these figures are only indicative and would be subject to a detailed process and
consultation as per the Section 197 of the Labour Relations Act and other relevant legislation.
The following will be adhered to in respect of the legislative framework:
 New employer assumes all the responsibilities and obligations from the date of transfer and
transfer do not interrupt an employee(s) continuity employment.
 The transfer process does not prevent an employee from being transferred to a new
pension, provident, retirement or similar fund, however, the requirements of section 14 (1)
c of the Pension Fund Act no. 24 of 1956 must be satisfied.
 New employer is bound by the collective agreements and arbitration awards in terms of the
Act, unless reviewed in terms of section 62 of the Labour Relations Act.
 All relevant information must be disclosed to the employee(s) concerned and / or
organised labour.
 There is a requirement for valuation [due diligence on employee(s) personal files] as at the
date of the transfer.
 For a period of twelve (12) months after the date of transfer the old employer is jointly and
severally liable with the new employer to any employee who becomes entitled to receive
payments as contemplated by subsection 7 of section 197 of the Labour Relation Act
(termination due to operational requirements).
 The old and the new employer are jointly and severally liable in respect of any claim
concerning the term and condition of employment.
During the period before the transition and in respect of the remaining staff, the Metrobus will
conduct an intensive change management process to ensure that the transition to the SSMA will
be inclusive and understood by all. The change management process will include:
Awareness – Create an understanding for the need to change – Why is the change necessary?
Why is it happening now? What is wrong with what we are doing today? What will happen if we
don’t change? What’s in it for the individuals?
Desire – Create the desire to support and take part in the change – Which is dependent on the
nature of change, the credibility of the person leading the message of change, intrinsic factors,
history of the organisation. Effective leading and influencing can go a long way to help people
choose to follow the desire to change.
Knowledge – Give knowledge so people can understand how to change and what to do –
Providing training and education, detailed understanding of new tasks, processes and systems,
and understanding new roles and responsibilities.
Ability – Provide the skills to implement change on a day to day basis – Providing day to day
involvement, access to subject matter experts, provide effect performance monitoring, hands on
exercise during training.
Reinforcement – Create the ability and environment to sustaining the change and keep it going,
keeping the momentum going. – Celebrations and recognition, rewards, feedback to and from
employees, audits and performance measurement systems, accountability systems
6.5.3 ACCOMMODATION IMPLICATIONS
Metrobus is presently occupying a building next to Wits University which is owned by the City
and they do not pay rent. In the medium term it is proposed that this building be sold by the
City to Wits University at a market related rate. Wits University is keen to purchase the building
for their expansion plans. However for the purpose of this business plan, it is assumed that
Metrobus will continue to occupy this building and that the control centre for the buses will
reside in this building.
Page | 24
The Transport Department is constructing a new depot in Selby and will include a control room.
In the medium term, the control room of Metrobus can be relocated there if the Metrobus offices
are sold.
Page | 25
SECTION 7: FINANCIAL MODEL AND APPRAISAL
7.1
INTRODUCTION
The financial model is used to determine sustainability of the bus operator and to calculate the
Fee per KM payable to the party. Some basic assumptions and inputs costs were considered
when preparing financial model.
The financial model includes building the transaction flow through the phases of the model for
the number of years required in order to arrive at the required financial model output. The
financial model structure is as follows:





Assumptions
Projected Income Statement
Projected Balance Sheet
Projected Cash Flow Statement
Total capital expenditure and phasing in
7.2
FINANCIAL MODEL
The financial model amongst other comprises of revenues, costs, and profits margin.
7.2.1 REVENUES (FARES AND ADVERTISING)
Project revenues have been classified into two types, namely direct revenues and indirect
revenues. Direct revenues are those revenues that are directly attributable to the project and
are collected from primary beneficiaries of the project. They include fares and other sources of
revenue – at this stage only bus advertising.
The current Metrobus fares are based on zones and the distance travelled. This will change with
the new Automatic Fare Collection System (AFC) as discussed above. This will enable a fare
structure which bears a stronger relationship to the other modes in the Gauteng and other
provinces transport system.
The proposed fares which were modelled for the business plan are as follows:
Journey Length
2013/14
2014/15
Minimum fare including travel ≤ 5km
5.50
6.50
≤10km
7.20
5.40
≤15km
9.00
10.50
≤26km
10.70
12.50
≤35km
12.50
14.60
>35km (Maximum fare)
14.20
16.60
EMV Card
20.00
23.40
-
-
Occasional Users – One Trip
25.00
29.20
Occasional Users – Two Trip
37.00
43.20
Penalty Fees
14.20
16.60
10% off
10% off
Loading Fees**
Off-Peak Rates
The fare revenue has been estimated peak morning hour of 6 trips per bus and 2 trips per bus
during off-peak. The number of passenger boarding has been calculated based on the number
Page | 26
of buses, trips, and bus capacity for all MB routes, secondary routes and contract and scholar
trips.
Bus Capacity Estimation
Route
Description
Fleet
(Buses)
Routes
396
Vehicle
Capacity
(Pax)
Max
capacity
per bus
per day peak
Max
capacity
per bus
per day off peak
Max
capacity
per day peak
Max
capacity
per day off peak
Ann
ual
days
Max capacity
per year peak
Maximum
capacity per
year - off
peak
6
2
180 576
60 192
248
44 782 848
14 927 616
76
Total
capacity
59 710 464
The revenue has been estimated at R213 million in year one with 25 million passengers per
annum at ridership of 50% during peak hour and 20% during off-peak hour. An average
estimated fare of R8.40 has been used in the forecast with an average distance travelled of 10
kilometers.
Fare Revenue Estimation –2014/15
Vehicle type
Maximum
capacity
per year
Average
Occupancy/
Ridership
Estimated
passenger
number
Peak
44 782 848
50%
22 391 424
8.40
188 087 962
Off- Peak
14 927 616
20%
2 985 523
8.40
25 078 395
Total
59 710 464
Average
Fare
25 376 947
Fare Revenue
213 166 356
The revenue has been estimated at R275 million in year two with 31 million passengers per
annum at ridership of 60% during peak hour and 30% during off-peak hour. An average
estimated fare of R8.80 has been used in the forecast with an escalation of 5% increase per
annum.
Fare Revenue Estimation –2015/16
Vehicle type
Maximum
capacity
per year
Average
Occupancy/
Ridership
Estimated
passenger
number
Peak
44 782 848
60%
26 869 709
8.80
236 539 421
Off- Peak
14 927 616
30%
4 478 285
8.80
39 423 237
Total
59 710 464
31 347 994
Average
Fare
Fare Revenue
275 962 657
The revenue has been estimated at R343 million in year three with 37 million passengers per
annum at ridership of 70% during peak hour and 40% during off-peak hour. An average
estimated fare of R9.20 has been used in the forecast with an escalation of 5% increase per
annum.
Page | 27
Fare Revenue Estimation – 2016/17
Vehicle type
Maximum
capacity
per year
Average
Occupancy/
Ridership
Estimated
passenger
number
Peak
44 782 848
70%
31 347 994
9.20
288 380 977
Off- Peak
14 927 616
40%
5 971 046
9.20
54 929 710
Total
59 710 464
37 319 040
Average
Fare
Fare Revenue
343 310 687
In respect of bus advertising, Metrobus has a contract for bus advertising. It is proposed that in
respect of the existing buses, the full wrapping of such buses can continue but with the new
buses, advertising should only be allowed on the back of the bus.
The estimated amount of revenue per year is R9 million in 2013/14 escalating to R10 million in
2014/15 and R11 million in 2015/16. The revenue may slight decrease average of R8 million
per annum since the adverting will not cover the entire bus.
7.2.2 COSTS
The financial model and the resultant proposed fee per km is calculated taking into account
certain assumptions and input costs. The input costs are as follows:
 Bus running cost
o Fuel costs
o Lubricant costs
o Bus maintenance costs
o Tyre costs
 Bus fixed costs
o Insurance (Comprehensive, public liability, Sarsia and Other)
o License and registrations
 Employee Remuneration
 Overhead costs
 Bus funding cost
Once all the costs have been determined, a profit margin is added to provide Metrobus with
profit and positive cash flows over the next 12 years.
Page | 28
The following base assumptions have been made in developing the financial model for old buses
and new buses.
Period
Contract period in years
Number months per year
Number of days per year
Equipment number of working days per year
Bus Kilometre
Annual bus km
Repositioning KM/Dead
Number of dead km
Annual bus km (15% for repositioning)
12
12
365
312
Old
7 477
17.6%
1 317
8 794
Inflation
Consumer Price Inflation
Licensing
Wage/Salaries
2 155
14 390
8%
Old
250
25
275
New
166
9
175
Old
10%
New
5%
Overhead cost allocation
Number of vehicles - Ratio
Old
61.1%
New
38.9%
Bus Running Cost
Fuel per litre (Excl. green fuels)
Lubricants cost (% fuel)
Old
11.17
2.50%
New
11.17
2.50%
Bus Consumption
Average fuel consumption per 100/km's
Average fuel consumption per KM
Fuel cost per KM
Lubricants cost per KM
Tyre cost per KM
Maintenance cost per KM - Chassis
Maintenance cost per KM - Body
Old
58.70
0.59
6.56
0.16
0.70
3.26
0.81
New
52.00
0.52
5.81
0.15
0.70
1.60
0.41
Buses Reserve Fleet
Reserve %
Total
12 235
5.60%
6.00%
6.80%
Profit margin
Profit margin
Buses
Operational of vehicles
Reserve fleet
Total number of buses
New
4 758
17.6%
838
5 596
years
Months
Days
Days
Total
416
34
450
7.2.3 SSMA COSTS
There are certain functions that are currently performed by Metrobus that will need to be
moved to SSMA. The services that will be transferred amongst others include planning,
scheduling, inspectorate, marketing cost, call centre and cashiers. The total estimated cost to be
transferred to SMMA is approximately R19.8 million per annum. This comprises of employee
cost of approximately R18 million and marketing and telecommunication cost of R1.8 million.
Page | 29
7.3
FINANCIAL APPRAISAL
The City will pay Metrobus a Fee per KM based on the number of live kilometres travelled. A
commercial Fee per KM has been estimated at R38.03 and 36.72 for the old buses and new
buses respectively. The Fee per KM has included a commercial profit of 8% to allow the
operator to generate positive cashflows. The total number of kilometres per annum is estimated
at 14,390 million kilometres and 12,235 live kilometres. The contract cost of Metrobus is
estimated at R459 million per annum and the estimated revenue is R222 million resulting in a
deficit of R237 million. The deficit is expected to reduce to R196 million in 2015/16 and R158
million in 2016/17 as ridership increase over the period. A 12 year system income statement
has been shown in figure 1 below.
Figure 1: System income statement
Year
1
2014/15
2
2015/16
3
2016/17
4
2017/18
5
2018/19
6
2019/20
7
2020/21
8
2021/22
9
2022/23
10
2023/24
11
2024/25
12
2025/26
Total
TOTAL REVENUE
222 166
286 531
356 679
371 135
389 742
409 281
429 800
451 348
473 977
497 741
522 697
548 904
4 960 000
Revenue
Marketing revenue
213 166
9 000
276 489
10 042
345 612
11 067
362 892
8 243
381 037
8 705
400 089
9 192
420 093
9 707
441 098
10 251
463 153
10 825
486 310
11 431
510 626
12 071
536 157
12 747
4 836 722
123 279
Bus Operating Cost - Metro
459 056
483 033
514 789
548 656
582 290
611 111
648 651
688 519
730 861
772 993
820 597
866 122
7 726 678
SURPLUS/(DEFICIT)
(236 889) (196 502) (158 110) (177 521) (192 549) (201 830) (218 851) (237 171) (256 884) (275 252) (297 900) (317 218)
(2 766 677)
OPERATING COSTS
Page | 30
The Bus Operating Company (Metrobus) projected income statement, projected cashflows and
projected balance sheet are in shown in the figure 2 – 4 below.
7.3.1 INCOME STATEMENTS
Figure 2: Bus Operating Company (Metrobus) Projected Income Statement
Year
INCOME STATEMENT
REVENUE
Old buses
New Buses
1
2014/15
2
2015/16
3
2016/17
4
2017/18
5
2018/19
6
2019/20
7
2020/21
8
2021/22
9
2022/23
10
2023/24
11
2024/25
12
2025/26
459 056
284 328
174 728
483 033
299 197
183 836
514 789
318 792
195 997
548 656
339 758
208 899
582 290
360 562
221 728
611 111
176 716
434 395
648 651
187 548
461 103
688 519
199 051
489 468
730 861
211 266
519 595
772 993
137 721
635 272
820 597
146 181
674 416
866 122
866 122
9 000
10 042
11 067
8 243
8 705
9 192
9 707
10 251
10 825
11 431
12 071
12 747
425 052
448 277
478 882
513 140
546 376
564 394
606 414
648 255
693 307
730 315
778 973
814 590
149 513
90 165
2 254
10 073
47 020
159 036
96 258
2 431
10 647
49 700
167 563
101 782
2 595
11 148
52 037
181 086
110 955
2 899
11 862
55 370
192 997
118 851
3 150
12 526
58 471
188 310
120 576
3 195
13 228
51 311
206 157
132 133
3 634
13 968
56 421
222 258
142 070
3 978
14 751
61 460
239 904
152 704
4 352
15 577
67 271
247 730
159 771
4 573
16 449
66 937
265 315
169 455
4 872
17 370
73 618
267 843
176 557
5 120
18 343
67 823
24 609
16 963
7 646
26 035
17 930
8 105
27 364
18 773
8 591
29 082
19 975
9 107
30 747
21 094
9 653
32 507
22 275
10 232
34 369
23 523
10 846
36 337
24 840
11 497
38 418
26 231
12 187
40 618
27 700
12 918
42 944
29 251
13 693
45 404
30 889
14 515
Employee Cost
Basic
Benefits
Other:UIF, Bonus
184 256
184 256
-
192 732
192 732
-
210 167
210 167
-
224 458
224 458
-
239 721
239 721
-
256 023
256 023
-
273 432
273 432
-
292 025
292 025
-
311 883
311 883
-
333 091
333 091
-
355 741
355 741
-
379 932
379 932
-
Overhead Costs
Overhead expenses
66 674
66 674
70 474
70 474
73 788
73 788
78 514
78 514
82 911
82 911
87 554
87 554
92 457
92 457
97 634
97 634
103 102
103 102
108 876
108 876
114 973
114 973
121 411
121 411
EBITDA
Depreciation
34 004
19 543
34 756
19 543
35 907
19 543
35 516
19 543
35 914
19 543
46 717
18 143
42 237
18 143
40 264
1 000
37 554
1 000
42 678
1 000
41 624
200
51 532
200
EBIT
14 461
-
15 213
-
16 364
-
15 973
-
16 371
-
28 574
-
24 094
-
39 264
-
36 554
-
41 678
-
41 424
-
51 332
-
14 461
15 213
16 364
15 973
16 371
28 574
24 094
39 264
36 554
41 678
41 424
51 332
4 049
4 049
4 260
4 260
4 582
4 582
4 473
4 473
4 584
4 584
8 001
8 001
6 746
6 746
10 994
10 994
10 235
10 235
11 670
11 670
11 599
11 599
14 373
14 373
Profit after tax
Dividends
10 412
-
10 954
-
11 782
-
11 501
-
11 787
-
20 574
-
17 347
-
28 270
-
26 319
-
30 008
-
29 825
-
36 959
-
Retained income
10 412
21 366
33 148
44 649
56 436
77 009
94 357
122 627
148 946
178 954
208 779
245 739
Advertising revenue
OPERATING COST
Bus km dependent cost
Fuel
Lubricants
Tyres
Maintenance
Bus Fixed cost
Insurance
Licensing
Finance charges
Profit before tax
Tax
Corporate Tax
Page | 31
7.3.2 CASH FLOW STATEMENTS
Figure 3: Bus Operating Company (Metrobus) Projected Cashflow Statements
CASHFLOW ANALYSIS
1
2014/15
2
2015/16
3
2016/17
4
2017/18
5
2018/19
6
2019/20
7
2020/21
8
2021/22
9
2022/23
10
2023/24
11
2024/25
12
2025/26
Profit after tax
Add: Depreciation
Add: Interest expense
Operating Activities
10 412
19 543
29 955
10 954
19 543
30 497
11 782
19 543
31 325
11 501
19 543
31 044
11 787
19 543
31 330
20 574
18 143
38 716
17 347
18 143
35 490
28 270
1 000
29 270
26 319
1 000
27 319
30 008
1 000
31 008
29 825
200
30 025
36 959
200
37 159
Working capital
5 192
438
103
572
419
(793)
841
657
740
(37)
642
(510)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Financing Activities
Funding: Loan
Capital repayment
Bus Restructuring
Dividends
120 000
-
Investing Activities
Bus Acquisition
Bus Restructuring
Non-Current Assets
(120 000)
(52 000)
-
-
-
-
(5 000)
-
-
-
-
(1 000)
-
Free Cashflow
(16 853)
30 935
31 428
31 616
31 749
32 923
36 332
29 927
28 059
30 972
29 667
36 649
Cashflow - Opening
-
(16 853)
14 082
45 510
77 125
108 874
141 797
178 129
208 056
236 115
267 086
296 754
Cashflow - Closing
(16 853)
14 082
45 510
77 125
108 874
141 797
178 129
208 056
236 115
267 086
296 754
333 403
7.3.3 BALANCE SHEETS
Figure 4: Bus Operating Company (Metrobus) Projected Balance Sheet
BALANCE SHEET
1
2014/15
2
2015/16
3
2016/17
4
2017/18
5
2018/19
6
2019/20
7
2020/21
8
2021/22
9
2022/23
10
2023/24
11
2024/25
12
2025/26
ASSETS
Non-current assets
Vehicles
Old Buses
New Buses
Land & Building and Equipments
Land & Building
Equipment & Computers
Current Assets
102 857
85 714
68 571
51 429
34 286
17 143
-
-
-
-
-
-
102 857
85 714
68 571
51 429
34 286
17 143
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
49 600
47 200
44 800
42 400
40 000
44 000
43 000
42 000
41 000
40 000
40 800
40 600
40 000
40 000
40 000
40 000
40 000
40 000
40 000
40 000
40 000
40 000
40 000
40 000
9 600
7 200
4 800
2 400
-
4 000
3 000
2 000
1 000
-
800
600
357 132
(4 276)
27 315
59 614
92 157
124 827
158 540
195 900
226 920
256 138
288 264
319 236
Accounts receivables:CoJ
12 577
13 234
14 104
15 032
15 953
16 743
17 771
18 864
20 024
21 178
22 482
23 729
Bank and cash
(16 853)
14 082
45 510
77 125
108 874
141 797
178 129
208 056
236 115
267 086
296 754
333 403
148 181
160 230
172 985
185 986
199 113
219 683
238 900
268 920
297 138
328 264
360 036
397 732
130 412
141 366
153 148
164 649
176 436
197 009
214 357
242 627
268 946
298 954
328 779
365 739
120 000
120 000
120 000
120 000
120 000
120 000
120 000
120 000
120 000
120 000
120 000
120 000
10 412
21 366
33 148
44 649
56 436
77 009
94 357
122 627
148 946
178 954
208 779
245 739
Accounts Payable
17 769
18 864
19 837
21 337
22 677
22 674
24 544
26 293
28 192
29 310
31 257
31 993
Accounts payable - Bus Dep Km's
Accounts payable - Overheads
Accounts payable - Employees Cost
12 289
5 480
-
13 071
5 792
-
13 772
6 065
-
14 884
6 453
-
15 863
6 815
-
15 478
7 196
-
16 944
7 599
-
18 268
8 025
-
19 718
8 474
-
20 361
8 949
-
21 807
9 450
-
22 014
9 979
-
-
-
-
-
-
-
-
-
-
-
-
-
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Equity
Retained earnings
Current liabilities
Non current liabilities
Long-term loans PTIS
Short term loan - Banks
TOTAL EQUITY AND LIABILITIES
148 181
160 230
172 985
185 986
199 113
219 683
238 900
268 920
297 138
328 264
360 036
397 732
Page | 32
7.3.4 CONCLUSION
The overall Metrobus contract will require a subsidy of R2,7 billion over 12 years requiring an
average subsidy from the City of R230 million per annum. This is based on the achieving a
ridership of 70% during peak hour and 40% during off peak hour as from year three.
The 12/13 subsidy from the City R320 million and the subsidy for 13/14 is R330 million. Thus a
R100 million rand reduction in subsidy will be required from the City while Metrobus will see
an increase in passenger numbers per year from 30 million to 37 million after year three.
Page | 33
SECTION 8: TIMEFRAMES AND ASSUMPTIONS
8.1
PROPOSED TIMEFRAMES
The high level proposed timeframes are as follows:
 Refleeting and associated improvements: From February 2014
 Move to SSMA (change management process): July 2013 to July 2014
 Conduct process for final institutional form: July 2014
 Agree final form and implement: July 2016
Once the business plan has been approved a detailed project plan and associated timelines will
be developed.
8.2
CRITICAL ASSUMPTIONS FOR SUCCESS
There are a number of critical assumptions for the successful execution of this business plan.
They are:




Ongoing political and Board support for the proposed route approved by the Mayoral
Committee;
Sufficient resources for the change management process including financial and human
resource;
Funding for the refleeting of the buses and a modern bus and fare management system
from either PTIS or through financing from the City; and
That the rationalisation plan can be implemented in a way that creates new
opportunities for the mini bus taxis industry to the extent that the Metrobus routes take
away existing passengers from this mode.
Page | 34
ANNEXURE 1: MAP OF PROPOSED ROUTES
Legend
MB1
MB2
MB3
MB4
MB5
MB6
MB7
MB8
MB9
MB10
Page | 35