The looming auction of Kampala Coach buses to recover at least Ush2.5 billion (nearly $1 million) owed to the Uganda Revenue Authority exposes the challenges transport firms operating on regional routes are grappling with.

At least six big regional bus operators, including Kenya’s Akamba Bus, which had been in the business for over 60 years, have collapsed over the past decade.

Kampala Coach is one of two bus companies plying the region that are on the verge of collapse after failing to deal with the rising competition in the business. The companies have huge debts with commercial banks, tax authorities and social security bodies.

Uganda Revenue Authority officials say Kampala Coach owes $1 million in tax arrears accruing from unpaid VAT on some services offered, Pay-As-You-Earn (PAYE) for its employees and corporate taxes from 2007 to January unearthed in an audit carried out last year. A similar fate befell Akamba.

The Uganda-based Kampala Coach had 20 buses at the beginning of 2007 plying routes around East African capitals offering passenger, courier and parcel delivery services.

Indebtedness

Kampala Coach, which had made its a name plying the Kampala, Kigali, Bujumbura, Dar es Salaam, Nairobi and Juba routes, was last month closed down and seven of its 10 buses are to be auctioned if the company’s proprietors, Ahlam Abdulbasiet and Nijud Muhammed are unable to pay the tax debts.

“We have given the bus owners enough time to negotiate over the tax but they have refused to do so,” said Allan Ssempebwa, a media officer at URA, justifying the decision to auction the buses.

The Uganda National Social Security Fund is also demanding Ushs52 million ($19,830) from Kampala Coach as unpaid remittances for its 45 employees since November 2011.

In June last year, regional lender KCB put assets of the Akamba Public Road Services on sale to recover a Ksh168 million ($1.97 million) loan. This marked a dramatic end to the regional transport icon, which had taken the loan from KCB in 1992.

The directors of Akamba are said to have failed to invest in a new fleet of buses and human resource; leading to a decline in the quality of services offered, including time management and constant breakdown of buses. This led to losses.

As result, the assets of the 60-year-old public transport operator were auctioned to recover the loan, leaving more than 600 workers jobless. Another creditor, Treadsetters Tyres Ltd, moved to court over Ksh40 million ($470,580) owed by the transport firm.

The closure of Kampala Coach operations in Uganda coincided with that of Uganda’s Gaso Transport Services Bus Company Ltd, citing financial constraints.

Owned by the Ali Kamul family, Gaso had 10 fleets (that have all broken down) plying between Kampala, Bujumbura, Kigali and Mwanza in Tanzania. The company employed more than 150 people.

Twaha Ssendi, chairperson of Gaso Bus Conductors Association, claims that the employees were sacked prior to closing its regional offices as it was untenable to maintain a fleet that had broken down with no financial backup to service the buses.

Scandinavia Express Services Ltd, one of the first regional bus companies went into receivership in 2010 after years of business with seven of its buses auctioned to recover a Tsh1.3 billion ($783,864) debt owed to Africa Banking Corporation Tanzania Ltd.

Established over two decades ago, Scandinavia was the only Tanzanian bus company among the few modern that operated luxurious buses in the region. Its first cross-border service was in 2001 from Dar es Salaam to Nairobi, Kenya, before extending its services westwards to Uganda in 2002.

A year later, Scandinavia became the first luxury coach to operate between Tanzania and the Zambian capital Lusaka, a feat that earned it fifth place in the services category of the 2004 East Africa’s Most Respected Companies survey.

Integration of markets around the East African region has seen more transport companies move into cross-border operations.

Challenges

Over the past three years, the number of operators with fleets plying Uganda, South Sudan, Kenya, Rwanda, Burundi and Tanzania routes has more than doubled, to approximately 19 bus companies.

Many factors have, however, conspired to throw transport firms out of business. The era of technology has hit the courier business hard — traditionally a lucrative income stream for the buses — significantly eating into their earnings. New competitors have ventured into the profitable long-distance routes, eating into the market share of traditional players like Akamba and Kampala Coach.

Fuel, which makes up 40 per cent of a transporter’s costs, has also posed a challenge to the bus companies, as petrol and diesel prices edge up.

The number of cheap, short-distance flights across East Africa has been rising, further eating into the bus companies’ clientele.

In October, Kenya Airways received regulatory approvals for low-cost subsidiary Jambo Jet, opening a new battlefront with budget operator Fly540, which is to trade as Fastjet modelled around Easyjet, the second largest low-cost carrier in UK after Ryanair.

READ: Will Kenya Airways get it right this time on low-cost carrier?

Regional carriers like RwandAir, Air Uganda and Precision Air have upped the ante in the transport business in the region, offering cheap fares and more frequent flights.

However, while a return trip by bus from Kampala to Nairobi costs $60, the cheapest flight costs at least $300.

Officials from different companies are guarded on the question of passenger numbers and how it affects the business, but it emerges that while new players have come into the business, the passenger numbers have stagnated in the past three to four years.

A random survey of the various operators reveals that they are not doing well with numbers.

For instance, prior to the collapse of Akamba, another Kenyan company, Easy Coach, carried on average 15-20 passengers; but its fortunes seem to have improved as it now mops the numbers that Akamba used to carry.

Without stating why, an official at Modern Coast Bus Service also said the numbers had gone down, while Crown Bus, another operator, carries an average of 40 instead of 67 passengers full board. The 34-seater Queen Buses also often make the Kampala-Nairobi journey only half-full.

Queens Coach operations manager Muhammed Abdulaziz told The EastAfrican that fluctuations in passenger numbers across the region are worrying the regional bus services.

“We have a challenge of at times carrying fewer passengers meaning that we make losses. Now, coupled with the constant change in fuel prices, the situation has worsened,” said Mr Abdulaziz.

Apparently, some bus companies are going under because they stick to a rigid business model that separates VIPs, first and business classes.

Moreover, such operators do not share passengers with other bus companies. International passenger business demands that carriers strike up partnerships with other operators to share passengers, a situation that saves an operator from making costly journeys with no returns.

“Some companies think they are too big and will not share passengers with small operators, which impacts on their business,” said Denis Ouma Okoth, business development manager at Easy Coach Uganda, adding that failure to replace old fleet is another major undoing. “Old fleet is the biggest problem. Passengers want new buses, good customer care and time management,” he said.

These developments have left Mash Poa, Simba, Modern Coast, Easy Coach, Crown Bus, Spider, Gateway, Kalita, and Queen’s Coach as the alternative transport companies serving travellers between the Kenyan and Uganda capitals.

ALSO READ: Rura accuses bus firms of forming cartel over fares