Bus rapid transit in Sub-Saharan Africa: Private sector feedback about financial sustainability and commercial viability
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Over the past decade, bus rapid transit (BRT) has been regarded as an effective solution to the challenges faced in many cities in Sub-Saharan Africa (SSA) as a mass transit system with the potential to be delivered more rapidly and at relatively lower cost. However, despite the increasing interest from African governments in engaging the private sector, the mobilization of private sector capital has been slow and difficult.
Our recent study “Enhancing Financial Sustainability and Commercial Viability of BRTs in Sub-Saharan Africa-Market Analysis” investigates the private sector’s feedback.
How did we go about this? We looked at the investment appetite and risk tolerance based on consultations with public and private sector groups, international financial institutions (IFIs), public investment funds, private investment funds, development finance institutions (DFIs), commercial banks, operators, and bus manufacturers. It’s notable that most investors expressed their interest in BRT projects in SSA regardless of having experience there or not (Figure 1), although investors perceived the SSA market riskier than in other geographic areas.
They perceive the main risks as complex geometry and mobility patterns, weak institutional capacity, demand and subsidy risk, insufficient capacity of project design, inappropriate fare level and adjustment, automatic incumbent operators, and volatile currency. In particular, investors voted the risks related to incumbent operator management, expropriation, and government subsidy as the top one risk respectively for BRT development, construction, and operation (Figure 2).
Nevertheless, investors confirmed interest in two main PPP schemes including:
1. The “operation-centered” structure where the private partner takes responsibility for the provision as well as operations and maintenance of the fleet, intelligent transport systems (ITS), and fare collection systems. This leaves the public authority in charge of infrastructure delivery and maintenance.
2. The “fully integrated” PPP scheme where the private partner is responsible for the infrastructure design, construction, and maintenance, as well as the provision of all operational services and associated equipment.
The features of these two schemes reflect a larger appetite of investors for the SSA BRT projects with small to medium capital value, relatively high equity internal rate of return, high debt/equity ratio, significant engagement of public authority, and risk mitigation measures in place (Figure 3).
So, what could be the optimal financing schemes from the perspective of the private sector? Investors reached broad consensus on three aspects. First, public funds (from cities or central government) are needed for project development and infrastructure delivery. Second, private financing can be raised for the bus fleet and operations equipment through a hybrid of equity, debt, and insurance/guarantee products. Third, the involvement of IFIs/DFIs remains essential both for the provision of financing (concessional sovereign lending and project debt) and credit enhancement products (payment guarantee and political risk insurance).
- Dedicate the time and effort needed in upstream planning activities
- Design BRT to respond to the local needs and ensure alignment with costs considerations and ability to pay
- Set up a clear and transparent fare adjustment mechanism
- Undertake PPP option analysis and structure a PPP scheme that will attract experienced and credible investors
- Explore the full range of financing options and innovative financing mechanisms
- Ensure the sustainability of required fiscal support and diversify the revenue sources for investors
- Maintain the public sector’s support in the operations and maintenance phase
- Engage IFIs/DFIs to de-risk BRT projects
The role of the IFIs/DFIs in encouraging the participation of the private sector is very crucial. We recommend the IFIs/DFIs assist the public sector with capacity building on a variety of topics throughout the BRT project life cycle, provide technical assistance to the public sector by systematically assessing the project and identifying financially sustainable solutions, provide financing and credit enhancement products such as concessional lending, insurance against political risks, and underwriting of first loss insurance to the local currency, as well as explore innovative financing approaches such as fleet acquisition through a bus leasing model with IFI co-financing and mobilization of climate financing sources to SSA BRTs.
At the same time, our research has shown strong interest from the private sector, with public sector support, to take this subsector on. Let’s redouble our efforts to put the pieces in place to make the BRT subsector in SSA a viable option for people across the subcontinent.
This work was made possible by the support of the Public-Private Infrastructure Advisory Facility (PPIAF), the Africa Transport Policy Program (SSATP), and the Mobility and Logistics Multi-Donor Trust Fund (MOLO).
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This blog is managed by the Infrastructure Finance, PPPs & Guarantees Group of the World Bank. Learn more about our work here.
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Africa must develop without exceeding the 1.5 Cesius average temperature increase. A different solution must be devised. The plan must be to reduce the use of automobiles and to improve the performance of those remaining.
Working from home must become a norm. Short commutes and the use of bicycles and other forms of transport must replace buses.
The long term solution will be small airships. A number of problems face us in the sustainable and resilient development, mitigation and adaptation in Africa and the tropics. Biodiversity, afforestation, agroecology, clean energy and equity. All these must be met and our analysis must satisfy all since any failure will trigger multiple fall out.
Air ships must connect areas without roads now since there is not enough time to build roads all across Africa and if they are built it will be challenging using them due to conflict, robbery and animals.
Would you drive from Nigeria to Kenya? What problems might one encounter on such a journey?
Planes may be used to connect countries and overseas markets. Airships may be used to connect town and villages.
The airship may appear revolutionary but was used safely for over 100 years and can be used now with the computer and drone technology to make flying the craft possible with minimal training.
Hydrogen should be the lift gas since it is very active chemically and so will not leak into space like helium. Hydrogen has proved safer than helium if major airship crashes are examined. More than 60 of the passengers on the Hindenburg survived the fire while two military crashes had total losses.
Getting aloft is free therefore. The Stirling engine may be used to provide motive power. This is a heat engine and could be powered by the incoming heat energy and the external ambient temperature.
The potential energy available at 18,000 to 40,000 ft could provide the energy needed to power the ships.
The airships would be built on a production line similar to cars and have annual models or longer production runs to get the benefit of production.
The price should eventually be comparable to today's automobiles. The technology needed to control them need not depend on todays computer chips or programs but on much older and simpler circuits and programmes.
Look at the machines that was sued to reach the moon, that level of circuitry and programs could control air ships.
The pilot will be more likely to get stuck in the air than to crash given that the craft becomes more bouyant as it approaches the sea level.
Global Energy Nutrition Initiative has looked at SDG by 2030 and airships seem the best way to sustainably develop the tropics. It will take time to put them in place but each one built reduces the carbon footprint on the planet and net reduction of greenhouse gases must be the long term goal and any action that does not contribute to the goal should not be considered.
Prof. Barry Prentice of the University of Manitoba has described the benefits from using airships for transport and commerce and is the model we used for our project.
Please consider the problems we face and the urgent needed for solutions. Thank you the opportunity to have this input.
There is a tendency to push solutions regardless of benefits. In the presentation on the airship the Hindenburg crash is disastrous while the hundreds of air crashes since are not.
Solar energy is described as intermittent although there is no scientific proof that the sun's energy has failed to reach earth for even a giga second over the past 4 billion years.
It is therefore important that we take assertions by Journalists, scientists and politicians with many grains of salt.
This is just a reality come true as public transport in sub sahara especially nairobi Kenya has been a challenge and a quest for a permanent solution, this is a great intervention into the infrastructure sector, Hoping to change way and modes of public transport in Kenya and sub africa in general.
Definitely we rather have one bus emitting CO2 from its single exhaust than a thousand motorcycles with 1000 exhaust pipes.