Improving the viability of Bus Rapid Transit systems: Nine factors for Sub-Saharan Africa

While several cities across Sub Saharan Africa (SSA) are developing Bus Rapid Transit (BRT) networks, some of those systems have struggled financially and have not attracted as much private sector investment as expected. How can we explain the commercial and financial struggles faced by BRT systems in Africa? What are some of the possible solutions?  To answer this, our team reviewed BRT projects in nine cities across the region, with deep-dive investigations of three operational BRTs in the South African cities of Cape Town and George, as well as in Dar es Salaam, Tanzania. This analysis served as the basis for our recent report “Enhancing Financial Sustainability and Commercial Viability of BRTs in Sub-Saharan Africa: The Factor Analysis”.

Where do the financial challenges come from and what makes BRTs in Africa different from other regions?

Our research shows that the key issues that affect the financial and commercial performance of African BRTs include:

1. Inappropriate system plan specifications result in high up-front capital costs, coupled with overestimated demand and lower-than-expected revenue generation results in weak financial performance.
    
2. The absence of dedicated and well-capacitated transport authorities, poor coordination among institutions, and lack of political support makes it almost impossible to adopt a long-term, consistent approach to the financial management of BRT systems.
    
3. The absence of an enabling legal and regulatory framework and ineffective coordination with existing public transport operators undermines commercial viability.
    
4. Most concession contracts do not appropriately allocate risk and benefits between public authorities and private operators, giving operators little incentive to improve service quality.
    
5. Unregulated competition from paratransit operators (informal buses, minibuses, and taxis, etc.), difficulty of finalizing compensation deals and acrimonious relationships between paratransit operators and the government in SSA affect system revenue.
    
6. High incidence of cash leakage, suboptimal, politically driven fare setting and adjustment regimes affect financial performance.
    
7. Delayed resettlement and land acquisition processes dramatically increase the risks and costs associated with building new BRT corridors, scaring away private investors.
   
    

What are the key factors that can boost private sector participation?

To enhance the financial sustainability and commercial viability of African BRTs, our study shows that transport planners and operators need to focus their attention on nine priority areas:

1. Fiscal Capacity: BRT projects need robust and continued financial support, which governments and development financial institutions should strive to integrate into their long-term plans.
    
2. Legal and regulatory frameworks: The legal and regulatory framework defines the institutional setup of a BRT system, including the roles of government, incumbent operators, and the private sector. Strong legal and regulatory frameworks can motivate private sector participation, improve enforceability of contractual obligations, reduce transactional costs, and enable paratransit negotiations and integration.
    
3. Market dynamics: Transit demand, trip patterns, and bus technology choices can all impact the cost structure of a BRT. There is a strong need to set fares at a level that can deliver affordability while also ensuring the financial solvency of the operators. 
    
4. System design and business model: The system design should fit the local context (e.g. urban planning, mobility demand, climate conditions, and integration with major transport modes). Otherwise, it will cause construction and/or operating costs to escalate.
    
5. Policy and political will: Strong and continuous political support helps mobilize government to facilitate project rollout, robust stakeholder participation and secure the sustained interest of private operators/investors. 
    
6. Institutional capacity: Adequate institutions and processes are essential in overseeing the budget, planning, construction, and operations of BRT systems.
    
7. Incumbent operators: Introducing BRT along a transport corridor can significantly impact existing operators. It is important to begin engaging them as early as possible during planning and support discussions to understand how exactly the new service may affect incumbent operators, and look at options to compensate and/or integrate them as formal and professional BRT operators.
    
8. Participation Model: Risk allocation and benefit-sharing among public and private stakeholders should be balanced. If not, the private sector participation willingness will be low, which will weaken the price discovery effect of the PPP model and also exacerbate rent-seeking and contract breach risks due to lack of effective competition among qualified private participants.
    
9. Adjacent value: There are opportunities to leverage adjacent value around BRT depots and stations in SSA. The successful monetization of land value will require realistic estimation of land value and high level of institutional coordination and capacity to address the complex land ownership arrangements.

Introducing a new tool to assess the factors for BRT projects

Based on these nine factors, we developed a robust Excel-based tool that can be used by all stakeholders at any project stage to assess the commercial viability and financial sustainability of BRT projects and identify potential challenges to private sector participation. The tool is simple and customizable, with results displayed on a scorecard using traffic light indicators (red-yellow-green) to show the impact of a specific question or factor on the financial sustainability and commercial viability of the project (Figure 1).

We encourage all interested practitioners to download and apply the tool to their BRT project. We would love to hear from you, so please don’t hesitate to share your feedback in the comments section!