Africa Transport A- Technical Note Urban Mobility SSATP Note 27 September 2000 Urban Transport Microenterprises in Abidjan 22656 A7ntakoe Adolejhourmn and Alain Bonnafous Sub-Saharan Africa is confronted today with two major transport sector challenges: on the one hand, goods must be shipped more cheaply than is currently the case, and on the other hand, a steadily growing urban population requires appropriate means of transport. This note analyses the .IWhAla I Regarding the latter issue, which is the subject of this study, there can be no question that pr of itability, and financing of the subregion is facing an urban transport crisis. The urban transport situation in African private mass transit services in cities has changed markedly since the late 1980s; its key has been the gradual disappearance Abidjan, with an emphasis on of large public transport companies in the wake of restructuring and even liquidation. As a pr-ivate companies operating result, in many African capitals informal private enterprises have gradually moved in to fill minibuses commonlv known as the vacuum left by structured companies. <>. The Abidjan case study Most public mass transit companies - which for too long were accustomed to receiving is part of a regional study lauLnched state subsidies to cover deficits attributable in part to poor management - are close to early in 1999 uLnder the Urban bankruptcy for want of funds. Consequently, their fragility notwithstanding, private Mobility Component of the SSA I enterprises obliged to cover their costs are providing services which public companies covering four cities: Abidjan, cannot supply, particularly along routes spawned by urban sprawl. Bamako. 1-larare and Nairobi. The It is important to note, however, that this "conquest" on the part of small informal regional stud) was carried out by enterprises is based on a method of operation the legality of which is often open to question. SITRASS network (Solidarite Most public urban transport services are thus the product of a system that tolerates activity Inter-nlationlale sur les Transports et outside the rule of law and gives short shrift to sustainable mobility. The challenge, then, is la Recherche en Afi-ique to ascertain what support can be provided in order to make public transport efficient and Subsahariennie). sustainable. The purpose ofthis series is to An urban context and transport system with an increasingly "peripheral" share information on issies raised population and jobs located mainly in the city center bv the studies and work of the Abidjan's central districts are saturated, with the result that urbanization is increasingly SSATP. The opinions expressed in occurring in areas far from the city center - where the population is stagnant - a situation the notes are those of the authors that has significantly accentuated the employment/housing imbalance. As Figure 1 and do not necessarily reflect the indicates, the population of Abidjan is increasingly concentrated in the North (peripheral views of the World Bank or any of districts), while the sparsely populated districts in the South (especially the Plateau) provide its affiiliated organizations. most of the jobs (60 percent of all jobs but with only 34 percent of the agglomeration's total population). For information on these notes. These factors, along with the geographical constraints imposed by the city s location, contact the SSATP in the Africa affect the principal North-South trip patterns, from the peripheral districts in the North Region of the World Bank at: towards the central districts in the South. Although inter-district travel patterns within the North's districts have developed in recent years, the heaviest demand for transport in Abidjan is for North-South travel. ssatp a'worldbank. org The Abidjan Transport Company (SOTRA) was set up during the 1960s to meet this demand. Originally the backbone of the city's urban transport system, SOTRA's limitations began to emerge during the 1980s, thereby spurring the growth of the informal sector. O1 Sub-Saharan Africa Transport Policy Program (SSATP) * IJNECA and the World Bank 12 SOTRA's central role increasingly challenged by the Fig-9d 1 informal sector POpdlattrn QiIbut rov indthi10distrkls of Atbidj 3,500 000 After C6te d'lvoire became independent, Abidjan's public 11 PO-0-BIOc transport system gradually evolved to include the following A -i- .i key components: 2500,000 - C-dy D Abob. * SOTRA, a semi-public company with equity capital of 2.000,000 da YGpO0gO, CFAF 3 billion, operates one of Sub-Saharan Africa's largest s00, a Adamb networks. Since 1960 its primary task has been to provide / Trachvile mass transport services within Abidjan city limits under a 1000.0oo0 c 4.,ty concession agreement with the State. 500 000 _ * Minibus services, or "gbakas"' - vehicles with 14-32 seats (most have 18 seats) - are operated by private transport oAbidj lIM Abidjt- I1998 operators on an informal basis, covering two main types of routes: mid-1990s the Government set out a wide range of options, most > three legally authorized lines running primarily from of which have yet to be introduced: Adjame terminal to the three peripheral districts of . Gradual rehabilitation of SOTRA's vehicle fleet to increase Dabou (including Bimbresso), Anyama and Bingerville; the number in operation from 541 in 1994 to 810. However, o «illegally operated» lines on market segments within an by 2000, the company had barely 500 vehicles in service. area where SOTRA theoretically is the exclusive * Implementation of a rehabilitation and financial restructuring operator. Limited until 1992 to serving the Abidjan plan for SOTRA covering the period 1994-2000. The plan agglomeration districts of Abobo and Yopougon, the cannot be deemed a success, inasmuch as in June 2000 the gbakas gradually invaded SOTRA's entire area of company was carrying a debt of CFAF 30 billion (six times operation - a development which sector authorities higher than its equity capital); virtually ignored - as SOTRA proved incapable of * Concentration of the SOTRA fleet in a smaller area and meeting demands in terms of schedules and coverage. transfer to a private operator of service to the Abobo and There were some 1,000 city taxis, commonly called Yopougon districts. In June 2000 SOTRA was still serving the "woro-woros"2 (private cars with four seats), in 1989; in two districts even though the Government had signed a 1998 there were nearly 5,000. Until 1992 they operated concession agreement with a private operator (SOTU) in solely between districts, but with the devaluation of the 1998. SOTU still has not put a single bus in service in CFA franc in 1994 and, in particular, the greater ease of Abidjan, despite the fact that it was to have begun operations importing used cars, in 1996 they began to offer early in 1999. expanded service to more places in market segments that were being neglected because of SOTRA's deficiencies; Private metered taxi services operated throughout the P.t_r Pigorte.h 2.W-. 1988 .d.998 city. The fleet was estimated at 8,000 vehicles in 1998. __ SOTRA has faced increasing structural and financial _ = l_ difficulties in recent years (including excess staff, management problems, unpaid government subsidies) which Merketshate tor have rendered it unable to meet the demand for . i9_. transportation. In 1988 SOTRA serviced nearly one out of _____l every two trips, whereas in 1998 it accounted for only one in __ _ _ L _ _ _L four motor vehicle trips. Its market share dropped from 47 3.0.0 percent in 1988 to 27 percent in 1998. (The most recent U...P.11 -d. household survey was conducted in 1988; there have been no further surveys and the 1998 data are approximate and too favorable to SOTRA.). During the same period, the gbakas At the same time, the Government launched a study to consider the have nearly doubled their market share while that of the introduction of urban railway passenger service using existing woro-woros increased from 16 percent to 27 percent (see railway infrastructure (currently operated by SITARAIL). The Figure 2). service is intended to complement SOTRA bus service and In order to overcome these difficulties and enhance the services supplied by private operators. efficiency of the urban transport sector in Abidjan, in the A positive development from the institutional standpoint is worth noting. In the interest of greater efficiency, in March 2000 the Urban Transport Management and Operations Agency I In the Dioula language, "gbaka" means a vehicle in poor (AGETU) was established to regulate and manage the entire urban technical condition. transport sector 2 In Dioula, "woro-woro" means "thirty francs-thirty francs." Fares are now over CFAF 100 but the name has stuck. 1 3 An efficient informal sector plagued by major negative that they had turned to financial institutions (such as banks and externalities finance or leasing companies) at least once since they had been in Although the gbakas enjoy a favorable business. position in Abidjan under the modal Table: Investment payback periods based on the value of a renovated vehicle split, system dysfunctions have created O (1) On ) Owner (3) major external obstacles, including Value of a new vehicle 20 850000 20 850 ( oo 20 850 000 increased traffic congestion, a high Constant monthly installment per 0,0208847 0,0208847 0,0208847 accident rate, and air pollution. These franc of capital problems are the result of four principal Discretionary monthly cash flow 592 870 558 500 533 887 factors: Payback penod (months) based on percentage of cost of new vehicle * The sector is highly fragmented, 70.00% 40 44 48 comprising a large number of small 65.00% 36 39 42 enterprises. On January 31, 1999 the 60.00% 32 35 37 fleet had approximately 3,000 vehicles, 55,00% 28 30 32 and 80 percent of owners possessed only 50.00% 24 26 28 and 80vpericlent.of ownerspossessedonly (1) Owner-driver with co-driver; (2) Owner-driver with no co-driver: (3) Owner one vehicle. Source: SITRASS, 1999 * The predominant vehicles are low- capacity minibuses. On January 31, 1999, 92 percent of the fleet consisted of Given these financing sources, it is important to know fairly vehicles with 14 to 22 seats. precisely the capacity of the operations for generating discretionary * With the opening up of the market for used vehicles in cash flow (i.e., current cash flow the operator can use at will) that 1996, the average vehicle age will increase in the next few may be spent on new equipment. years. In January 1999 more than one-half (55 percent) of the gbaka fleet was less than 10 years old and nearly half was Profitability of operations and replacement of the vehicle fleet older than five years. A three-stage process was followed. (i) First, the financial return of * Drivers are pressured to push themselves to the limit to t o w eam he ail amunt .vhice oner reuir, pus su to the operation was calculated using the existing situation as the earn the daily amounts vehicle owners requlre, plus a sum to reference point and taking existing financing mechanisms into supplement their meager fixed monthly salaries, account. (ii) Second, the same calculations were made on the basis These negative factors notwithstanding, the sector fulfills of financing arrangements that could be implemented to encourage very valuable social and economic roles. According to operators to replace their vehicles. (iii) Finally, it was determined SITRASS surveys and estimates in 1999, the sector provided whether these new arrangements were attractive enough to approximately 12,000 direct jobs (drivers, conductors, encourage operators to replace their equipment and, where this was mechanics and owners) and generated a turnover of CFAF 60 not the case, the financial conditions that should be satisfied in billion. order to achieve that goal were identified. How is the gbaka sector financed and how profitable is the The results of these calculations need to be put into perspective operation? Given the uncertainties affecting profits (for in the light of several factors. To begin with, for some gbaka example, driver turnover and breakdowns), what help can be owners, transport activities are only one source of income among provided to promote the rehabilitation and sustainability of others. This means that they have more financing options than in the sector, particularly with regard to replacing the vehicle the scenarios detailed in our surveys. Furthermore, diversified stock? Answers to these questions follow. investments are common in the sector, and the fact that a vehicle's operation yields a discretionary surplus will not necessarily prompt A sector with "obvious" prospects for profitability but an operator to consider replacing it, even if the operator has no uncertain prospects for sustainability other more attractive investment opportunities. The analyses carried out indicate that the operating conditions The objective here is twofold: firstly, to underscore the for gbakas in Abidjan are not such that new vehicles can be capacity of these microenterprises to produce a surplus financed in a way that would yield a return satisfactory to sufficient for replacing the vehicle stock with equipment in operators accustomed to payback periods under five years and good condition, particularly by purchasing safe equipment, three-year loans. For example, in the case of a new 18-seat gbaka, whether new or, more likely, overhauled; and secondly, to the rates of return are nearly 10 percent with payback periods determine the best ways to finance such acquisitions.. longer than seven years. Thus, where a maximum payback A sector financed primarily through traditional channels duration of three years is the goal, the best solution would be to purchase good-quality used vehicles. The manner in which gbaka owners in Abidjan finance their Assuming a hypothetical scenario with concessional financing operations does not appear to differ very much from how this (with an interest rate of eight percent and down payment of 25 is done in other African capitals. Vehicles are financed percent of the vehicle's value), a simulation was carried out to mainly through down payments or via the "work and pay" determine the profitability of operations for three different owners system, in the case of owner-drivers. However, Abidjan of 18-seat gbakas costing from 70 percent down to 50 percent of differs from Bamako, for example, in that a large number of the cost of a new vehicle. Such variations are possible depending owners (55 percent of the sample surveyed in 1999) indicated 1 4 on how much a vehicle has been renovated and the extent to In conclusion, the analysis of profitability and fleet replacement which the overhaul was subsidized. The results are set out in demonstrates that the following scenarios are possible from a Table 1. strictly financial standpoint and given current operating conditions: The table shows clearly that for a vehicle costing 50 pereto table showstof clearnew tht foro y CFA F v e ctiong * Owners can finance a used 18-seat vehicle themselves. Such the retur is virtually the same as under the existing transactions are profitable because the investment is paid off in a arrangements. However, under this scenario the overhaul little under one year. wouldhanme. Howver, subidizedr thisseownariothe wou have * Another option would be to purchase a new vehicle of the same agree to performance standards he would be hard v to type on credit. However, this would not be a sufficiently profitable accept. However, at a cost of 55-60 percent of the cost of a operation to interest operators, even at a subsidized rate (eight new vehicle, the proposed solution could work. In addition percent interest), since the rates of return would be low and the the payback periods appear to be too long. payback period would exceed seven years. Nevethelpaybackperiodss, r the a e onlusiong may b e* However, owners might consider purchasing an 18-seat the light of several factors: renovated vehicle on credit at a subsidized rate (rates of return of 30 percent and payback periods of about three years). m A down payment above 25 percent, up to an amount S r yielding a discretionary cash flow, would produce more Subsidized rates will not prove viable in the sector unless Abidjan disposable cash after finance charges have been paid, thereby undertakes a complete overhaul of its urban transport system. That resulting in a more attractive payback period for a new is why an authority is needed to manage the entire process within a vehicle. Some operators may well opt for such a solution and broad framework providing for rigorous planning. AGETU should yield to the temptation to choose a new vehicle, thus profiting therefore serve as a forum for long-range planning of the urban from the windfall resulting from subsidized financing, transport system integrating the sector's multiple dimensions and * Fleet owners with multiple vehicles are more likely to varied challenges, in particular the following: decide to buy new vehicles if they can arrange to replace * human (the right to transport, particularly for the poorest some of their existing vehicles. This way, they can free up a population segments); substantial sum by selling the older vehicles, thereby * economic (minimize investments and operating costs); and lowering the amount of financing they require and, hence, the * environmental (reduce negative externalities, including air finance charge they must pay. pollution and urban traffic noise and congestion). Th main obeciv :; f theS SSAT Urb00tk 7::0E: .:0r r r ktt :r0 :7 f0 :f The; main ob,jectiveD of the;d SSATPH Urban Mobility Component fis to promotetrnport policy reform. It pursues this objective through activities to improve i inalind reguatory fraTeworks, and road styparicuarly Wt regardto pedestrian afety by canying out studies off anioerprises, and launching an air quality mement initiative, ad by strengthening local capacity. The Component has currently 18 member countries. For infornation, please contact Patrick Butyack, coordinator of the UM Component, at pbultyncknaworldbankrorg.