What
is happening in the Western Cape in the Bus Hire Industry
- are bus and coach companies really in the worst
financial position ever during the last 10 years?
In general this statement seems to be true; it is
a fact that at least four reputable coach operators
have had to either sell their businesses, or sell
shares to large holding companies, or sell a substantial
part of their fleet in order to survive financially
- or at least to buy some time for some or other miracle
to happen. Where did things go wrong then? At the
turn of the century it was like arriving in heaven
if you were in the bus and coach business. One could
buy a luxury tour bus for R1.8m and get a R600 000
"cash-back" subsidy from the government
- to help entrepreneurs get on their feet and use
the funds as operating capital until the business
was sustainable.
It seemed there was enough work for everyone that
purchased these subsidized buses with the nice fat
cash back, plus tourism was on an upward curve and
credit easily available - whether in the form of overdrafts
from banks to aid entrepreneurs even further with
their cash flow, or suppliers of fuel giving extra
lenient terms.
On the surface everything looked fantastic - in the
Western Cape alone a R100 million was floating around
in cash backs / subsidies - a successful new South
Africa was at long last a reality in this industry!
Well, at least for the better part of the decade things
were looking rosy and after tourism started its downward
spiral in 2008, there was at least the expectation
of the 2010 Soccer World Cup to keep the boat floating,or
rather the bus on the road, with strange looking contracts
being dished out around every corner - and bankers
not wanting to spoil the party; the World Cup was
the life line in the midst of a hard hitting global
recession for most bus and coach operators nationally
- even the ones with the reputable names.
To
cut a long story short, it was just a matter of time
for all of the above to take a turn for the worst.
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- Very
few subsidized bus operators had the experience,
knowledge or ability to manage their businesses
in such a way that it had any chance to become
sustainable when the substantial cash subsidies
were depleted and the credit crunch came into
play.
- Bus
hire rates in the Western Cape have not made
sense for years - simply because the average
(and even above average) bus operator are
not aware of their break even point on running
a coach - in other words buses have been dumped
in the bus hiring market for years where the
operators do not cover their total cost to
operate the vehicle.
- Not
only did this mean a slow death for many,
it has also created a market in which clients,
from international tour operators to the local
school or church, have been able to hire a
bus at 30% less than the going rate in Gauteng.
With the Gauteng bus operators being exposed
to a much larger market with less seasonal
trends than the Western Cape, and still finding
it hard to survive, where does it leave the
operators with less vehicle utilization and
rates at 30% less than the what it should
be?
- To
make matters worse, 420 luxury coaches were
bought by the government for the Soccer World
Cup, thereby vastly increasing the capacity
of an already over supplied industry.
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