Category: Long-distance Transport

#176 October (August) land transport survey summary and market analysis

MISSING MIDDLE: Between passenger rail and bus services is the minibus and midi-bus taxi industries, buzzing through the town streets and bearing more than 60% of the public transport market. in the Land Transport Survey, published yesterday, they are the missing link although they dominate the market. Given new technologies, and stronger relationships the future presents an opportunity for the industry to selectively report on their practices and operations in an integrated and anonymous framework. [*shot in Rustenburg]

Income on the rise year-on-year with fewer tonnes shipped

Overall freight payload volumes declining by 1.9%, while freight income from the payload is up by 0.7%. While the sources of this increase were fundamentally lead by the primary mining and quarrying, which dominates the income base there are a few other smaller contributors going through massive change. The decline is lead by a 2.1% decline in rail freight tonnes shipped between March-May and June-August this year. Now a freight modal split ratio of 76:24 is reported between rail and road. This is a steep contraction for the rail freight industry which at some point secured 27% of the market. 

However, on a seasonally adjusted year-on-year basis for the three-month June-August period, the road freight industry has lost it’s total shipment volumes from 187 million-tonnes-shipped (mts) in 2018, to 178mts tonnes shipped in 2019. Rail freight has increased its volume base for the same period from 53.6 mts in 2018 to 54.1mts this year. Even with the same modal split ratio year-on-year, rail freight’s reported percentage decline for the period is actually an increase in the year-on-year mts: good footing for Transnet. 

What is important now, is that these volume growths need to be accommodated by the appropriate levels of service which requires both improvements in network capacity and customer service. However, the road freight industry is gradually contracting, transporting fewer consignments year-on-year. With fewer consignments to transport, and increasing income, cut-throat competition is probably one  of the contributors to the increasingly tense, violent and volatile dynamics in the road freight industry

Commercial products; used household and office products; and parcels have been a rapidly growing source of income this year with consistent double-digit growth rates. For context, between March and May these segments respectively grew by 13%, 25% and 4.5% year-on-year. In this month’s report for the period of June to August they grew by 16%, 40% and 22% reflecting a increase of R400m on a year-on-year basis from R1.6bn from R1.2bn in income over the June-August period. 

Passenger rail on a downward spiral but income keeps flowing in

With a focus on largely scheduled land passenger transport and excluding the minibus taxi industry the results of the survey represent perhaps 26% of the travel economy. Of interest is that this report provides information about the rail and road passenger markets which are highly subsidised in the urban-rural mobility market, not long-distance (other than Autopax) . Even with these subsidies in place, passenger journeys (PJ) by rail have declined by 35% between August 2018 and 2019, while road PJs are down by 4.4% year-on-year. The peculiarity of these declines is that while the passenger market declined by 18% y/y in August, income was up by 3.1%. Therefore while rail PJs are down income rises by 7.1%, while road PJs  decline income is up by 2.1%. This is a host for market inefficiencies, unless if new passenger travel segments have emerged with a higher willingness to pay for valuable services. 

In absolute terms, passenger rail is on a downward spiral. The first eight months of this year accounted for about 126 million PJs, last year these were nearly 179 million PJs over the same period. Over the same period, road PJs have declined from 200 million PJs to 193 million PJs, while income is steady and easy-flowing. With December encroaching, it is expected that the PJs will decline as with the trend for most years. At this rate, it is only reasonable to either invest in new higher-paying segments, or sustaining operations with lower passenger volumes by means of increasing subsidies. 

Given the scale losses in Autopax, a subsidiary of Passenger Rail South Africa (PRASA), the long-distance bus market is increasingly competitive with new entrants such as the low-cost African People Mover and ELNO buses, incumbents are under strain. With highly diversified competitors such as Unitrans, a subsidiary of KAP, the luxury and low-cost market competitive positioning is highly dependent on brand, price and operations. Autopax is now under pressure to renew its fleet, while incumbents have already embarked on either a renewal scheme or have refurbished their fleet in-house: or both, as with the case of Intercape. 

Metrorail has been associated with significant losses in passengers, anarchy and poor quality service, although PRASA’s most recent submission to the Parliamentary Committees highlights their focus on improving business processes, monitoring and investing in executing the backlog of targets. Furthermore, the Guatrain reports a 7.1% decline in rail passenger volumes year-on-year, and a 17% decline in passengers for their bus service. 

Remarks

The underlying narrative here is that for the freight market, increasing payloads for rail transport are evident year-on-year, but they are offset by road freight payload market that is growing slower. Road freight is particularly important as it is earning less income per ton-shipped at an increasing rate. Transnet Ltd, may need to orientate itself toward improving the effectiveness operational practices in order to harness the slower road freight market. Road freight will need a regulatory framework beyond the strategic policy positions such as the strategy, information management frameworks, or implementation plans associated with the industry from the National Department of Transport. 

From a land passenger transport market perspective, there is more reason to expand the survey to include minibus and midi-bus services because of the nature of the passenger market. However, with the small glimpse at hand, the market is on a decline with regard to passenger volumes, but on the rise in terms of income. The ratio is important here. Passenger rail is less competitive, and the media reports of the stigma against Metrorail has been quite clear in the numbers. Commuters have more and probably better options, and the consistent decline of nearly  60 million passenger journeys this year already is clear evidence. Whether it is a shift toward private cars or the dominant public transport, if not ride-hailing and emerging shuttle services— high capital incumbents are loosing their foothold. 


*Thank you for getting through this one. The Land Transport Survey is readily available from Statistics South Africa, published on the 21st October 2019.