Here is a more viable financing strategy for mass transport in Kampala
Dr. Kiggundu Amin Tamale
Several articles recently indicated a growing recognition that an efficient public transport system is needed to curb traffic jam and promote urban sustainability in Kampala.
A grand plan by the Kampala Mayor, Al Haji Nasser Ssebagala, to introduce high capacity transit systems such as the double-decker buses hit a brick wall because it lacked a sound funding strategy.
Key features of the current funding strategy
Over-reliance on the private sector. Most mini-buses operating in Kampala are, for example, driven by their owners.
The dominance of this category of investors in the public transport industry is due in part to the establishment of UTODA in 1996 as a cartel-like organisation as well as its recent ascension as a key political constituency for some.
Besides, private mini-bus operators and investors often use their own savings and daily fare revenue to buy new vehicles and finance operational costs.
Weaknesses of the current funding system
Over-dependence on the small private investors, the minibus operators.
While the private mini-bus owners have in the past helped to fill the funding gap left by the Government after the adoption of neo-liberal economic policies in the early 1990s, their future relevance in a city that is heavily-congested and in need of a change from low-capacity transit systems to high-capacity systems to meet the burgeoning travel demand is questionable.
Importantly, small size businesses such as minibuses usually fail to access local finance because they lack collateral and documented trading history.
The dependence on the daily fare revenue as a key source of funding is also risky because in most congested cities like Kampala the frequency, average traffic speeds and the fare revenues are often affected by traffic jam. Further still, mini-bus operations usually face family-related problems. The death of the mini-bus owner can lead to the collapse of the entire business.
Innovative strategies have been adopted in some big cities to fund mass transport.
In London, motorists driving in the central business district (congestion charge zone) are required to pay a ‘congestion fee’ of eight pounds. The money collected is used to fund public transport in the city.
In Singapore, motorists driving in the city centre are paying a congestion fee. Again, the money collected is used to fund and promote public transport.
In Tokyo and Hong Kong, a ‘value capture’ funding system is widely used to finance public transport-related projects. Under this system, the increment in land and property values caused by accessibility and expansion of public transport to diversify their sources of revenue and to pay for the capital costs.
The developments (both commercial and residential) attracted by the proximity to public transport increases the population density and the demand for public transport. This has been particularly the case in the Tama satellite city near Tokyo where transit-oriented developments have been undertaken.
A further funding system that has been adopted in Tokyo is the public-private sector partnerships. These partnerships provide an opportunity to allocate commercial and non-commercial risks more efficiently to the party best able to manage them.
Under the same partnerships, the state in Japan has offered tax incentives and soft loans to the private public transport firms. Besides, the buses operating in Tokyo are fully owned by the Tokyo Metropolitan Government.
To improve the efficiency and financial performance of transit systems, transport planners in Tokyo and Hong Kong introduced supplementary policies such as stringent car parking controls, high fuel prices, high car ownership taxes and the promotion of high density urban developments such as condominiums.
Most of these policies were instituted to discourage the use of private vehicles to make transit more competitive and profitable.
l In Kuala Lumpur, Malaysia, the government has often offered ‘soft loans’ and fuel-related subsidies to the private public transport firms. Transit operators in Kuala Lumpur have also used bonds and the stock market to mobilize capital to invest in mass transport.
Experience also indicates that it is crucial that the transit-related investment plans are implemented as part of the entire urban development and investment policy.
This is necessary because usually the performance of transit systems is dependant upon the existing urban environment. That is, the performance of the urban economy, the road traffic situation, the settlement/housing patterns and the location of other key human activities such as industrial establishments and recreational centres.
The need for a new funding strategy for Kampala
The need for a new funding strategy for transit in Kampala is apparent. While it may not be possible to implement all the above stated foreign policies, a few of them could still be locally introduced.
For instance, it is possible for the government to offer soft loans and tax incentives to the public transport operators in Kampala.
Another possible funding strategy is the imposition of a congestion fee on all motorists driving in the city. A congestion charge zone can be established and the money collected could be used to provide soft loans to the private public transport operators and to build transit-related infrastructure in the city.
It is also possible for the government to build coherent partnerships with the private sector and intervene strategically especially in managing and alleviating traffic jam and regulating the services provided plus issues like market entry and safety standards.
It is crucial that all UTODA-linked mini-bus operators are forced to form a new big jointly owned transit firm that will have the capacity to mobilize long-term investment capital to invest in high capacity systems such as the big buses and railway systems.
With regards to subsidies, it is important to recognize that they are not a viable funding strategy, especially in the poor and developing cities like Kampala. Armstrong-Wright (1987) aptly states that ‘subsidies usually lead to inefficiency, greater deficits, and yet more subsidies’.
Political will and commitment from the government are critical in finding a lasting funding solution to the intractable financial problems facing the transit sector in Kampala.
.The writer is an urban expert, teaching at Makerere University and working as an associate consultant at Uganda Management Institute (UMI). He is also the Executive Director of Centre for Urban Studies & Research (CFUSR)