
The Tanzania Investment Centre (TIC) has joined the drive to address public transport woes in Dar es Salaam and efforts being by made by the authorities to end the nagging problem of traffic congestion in the city.
The agency said it is now ready to offer fiscal incentives to enable local investors to import modern buses to create public transport fleets, which are a sure way of safe commuting in cities. The TIC incentives include tax exemptions to transporters who will import new big buses for providing commuter services in the city.
Its director of Investment Promotion Raymond Mbilinyi told BusinessWeek recently that the incentives aim at encouraging local investors to invest in modernizing public transport to overhaul the current wanting system and help to reduce traffic jams on Dar es Salaam roads.
He said investors interested to invest in commuter bus companies can approach the agency for assistance.
"TIC can assist in providing incentives such as tax exemptions to local investors who form partnerships to acquire modern buses. The incentives will not only attract and retain the investors in the city transport sector, but also help to create formal jobs in the industry and the national economy at large," he said.
TIC has been reluctant in the past to give bus operators such incentives, they said, was important for the sector’s growth and development as well as a measure to increase the safety of passengers.
Owners of upcountry buses have for many years called on the agency to include passenger buses into the list of capital goods which would make them eligible for exemption of some taxes.
Last year, Mr Mohamed Abdullah, the chairperson of the Tanzania Bus Owners Association, told BusinessWeek that its members wanted the government to waive VAT on new buses. He said by doing so, would greatly help to address the problem of accidents on the country’s roads since transporters would be enabled to reasonably acquire news buses.
But with the tax on, he noted, acquisition of new buses is expensive, forcing many transporters to resort to old vehicles that jeopardize the safety of passengers.
It is expected that TIC’s fiscal incentives offer will also include buses plying upcountry routes. Currently, buses providing upcountry transport services, also include those with built on lorry chasses, which logistics management experts say is mechanically wrong.
TIC says tax waiver for public commuting buses will be given to transporters who partner to form companies or associations operating transport fleets. In Kenya, such services are provided by groups of operators who have joined forces to form saving and credit cooperative societies (saccos).
The Surface and Marine Transport Regulatory Authority (Sumatra), has already ordered Dar es Salaam commuter bus owners to form transport such organisations or risk being banned from doing business.
The authority argues that Dar es Salaam public transport currently dominated by individuals owning single buses, would improve if the owners operate as companies or cooperative societies. The present chaotic nature of the city’s transport is due to the fact that each owner tries to maximize revenue in a single day without regard to traffic rules or safety of commuters.
"Only operators who team up to form companies will be licensed and the rest will be banned,” Sumatra director-general Israel Sekirasa had told commuter bus owners at a recent meeting in Dar es Salaam.
He said the plan had many advantages including improving city transport and enabling bus companies to easily get loans from financial institutions. Mr Mbilinyi urged private operators to form partnerships to create medium and large commercial fleets that would facilitate profitable operations.
According to him, engaging the private sector in transport service delivery is important in improving services, adding that private companies or cooperatives can also easily attract local capital and/or foreign direct investment that are required to transform the sector.
The investment promotion expert said transport companies could raise money from banks to finance assets and vehicle acquisition through arrangements such as leasing finance and capital markets.
He urged commuter operators to form saccos as a way of raising long-term capital from various sources since such groupings appeal more to financiers than individuals. He said major benefits of commencing commuter city bus transport companies would include improvement of quality of service and enhancement of planning and management of operations.
Available statistics show that currently, Dar es Salaam has about 6,000 commuter buses that are owned by about 3,171 operators. These buses carry only 43 per cent of the city daily commuters. Most of the commuter buses have a capacity of less than 30 seats. This results into most people resorting into to owning vehicles.
Other benefits to be accrued from forming city bus transport cooperatives is the reduction in vehicle operating costs, improving efficiency and offer quality service to commuters. Logistics expert say such arrangements would also be an incentive for attracting investors to establish bus assembly plants in Tanzania.
Commuting fleets, they argue, would also promote use of compressed natural gas [CNG] or biodiesel for public transport, hence reducing fossil fuel imports. That would also boost possibility of undertaking of clean development mechanism [CDM] transport project, whose focus is reducing carbon emissions.
The CDM transport initiatives are being promoted worldwide to help attract financing of urban public transport using windows of carbon trading. Tanzania is also considering venturing into that area.
Mr Mbilinyi said limitations to efficient and safe public transport in the country include limited incentive packages, constrained financing as result of the global financial and economic crisis, infrastructure limitations and high fossil costs. According to him, investment in modern bus fleets is not only about getting money, but employment of contemporary business management practices.