Chapter 15

Some Further Issues Subsidies, Fares, Public Image and

MarketingGUIDELINES FOR

PASSENGER TRANSPORT IN SOUTH AFRICAA MULTI MODAL ANALYSIS

15.1 Introduction

• From Vuchic: “there can never be a single optimal mode for all urban transportation”.

• Optimal public transport system requires:– most appropriate combination of modes – adequate route coverage and, – frequent services– adequate funding, – a user-friendly fare system, – a strong “culture” of public transport– strong public image for the system

15.2 Subsidies in public transport

• Of major importance in public transport• As a policy instrument it has been used to

promote political and other objectives in South Africa

15.2.1 Justification for subsidy

a) Academic justification1. Determining the “optimal’ subsidy:– the economist would by means of supply and

demand curves, illustrate the beneficial effects of either a tax on private transport, or a subsidy to public transport or a combination of both

15.2.1 Justification for subsidy cont’

b) Non-academic justification1. Public transport is less costly, more efficient

and uses less energy than private transport under certain conditions of traffic flow.

2. Many urban residents do not have a car available to them (too poor) or for other reasons cannot use cars (too old/young/infirm, etc). – These people who can be considered to be the

transport “deprived”, should be compensated through subsidy

15.2.1 Justification for subsidy cont’

3. Greater reliance on public transport will assist environmental objectives such as a reduction in congestion and pollution and the preservation of the existing form of towns.

15.2.1 Justification for subsidy cont’

15.2.2 Subsidy Levels

b) Subsidy levels worldwide• “developed” countries routinely subsidise

their urban public transport operations to a considerable extent

• Subsidy levels in “developing” countries appear to be significantly lower.

15.2.3 Subsidy Levels and Prosperity

Two questions:1. Why are higher levels of transport subsidy

associated with higher levels of national income?

Answer: more research are needed

15.2.3 Subsidy Levels and Prosperity cont’

2. Does subsidy lead to prosperity or does prosperity lead to subsidy?

Answer: Probably “yes” on both counts• If subsidy (which in itself is not a cost to the

economy but merely a transfer payment) encourages a community to use a potentially more efficient form of transport than it would otherwise use, then the overriding objective of transport efficiency will be achieved, and real economic growth will be possible.

15.2.4 Subsidies in Relation to Macro-Economic Data

The South African Commuters Organisation (SACO), noted that:

• The gross domestic product of South Africa is approximately R2000 billion (7);

• The annual Government budget is approximately R600 billion;

• The Government receives approximately R20 billion each year from tax and levies on petrol;

15.2.4 Subsidies in Relation to Macro-Economic Data cont’

• Private cars “cost’ approximately R270 billion each year;

• Subsidies to public transport amount to about R6 billion;

• Private cars cater for only 30% of the population, while public transport serves 70%;

Against this background, SACO pointed out that:– Subsidy payments represent an insignificant

percentage of total payments on urban transport, the national budget, petrol taxes and the under perception of private car costs;

– Subsidy payments have been regarded by academics as justified in order to compensate the poor, to encourage the efficient allocation of resources and to correct the distortions caused by a low perception of car costs;

15.2.4 Subsidies in Relation to Macro-Economic Data cont’

• Against this background, SACO pointed out that: cont’– Developed countries routinely subsidise their

urban passenger transport operations to a substantial extent;

– Instead of eliminating subsidy, efforts should rather be made to ensure that subsidies are properly spent, and that subsidised public transport operations are properly managed.

15.2.4 Subsidies in Relation to Macro-Economic Data cont’

15.2.5 Subsidy Policy and Possible Sources of Additional Funding

• SACO recommends that the amount of subsidy for public transport should be coupled to yardsticks such as (among others):– The gross domestic product;– The Government budget;– The amount raised by way of petrol taxes.

15.2.5 Subsidy Policy and Possible Sources of Additional Funding cont’

• Should additional funding for transport subsidies be necessary however, SACO has suggested that the following possibilities be considered:– An increase in the petrol levy;– An increase in vehicle licence fees;– The introduction of an annual drivers licence fee.

15.2.6 Conclusion

• Public transport has been regarded by academics as justified – to correct the distortions caused by a low

perception of private car costs, – to compensate the poor and – to encourage the efficient allocation of resources.

15.2.6 Conclusion cont’

• ‘first-world’ and ‘developed countries routinely subsidise their urban transport operations to a substantial extent

• “privatisation” and free enterprise” have proved to have undoubted benefits, they have failed to eliminate the subsidisation of urban public transport and cannot be expected to do so.

15.3 Absence of a “culture” of public transport

• almost complete lack of a ‘culture of public transport” in SA

• supported by the disturbingly high levels of dissatisfaction expressed by users :– 71% of train passengers are dissatisfied with

overcrowding– 74% of bus passengers are dissatisfied with facilities at

the stops– 67% of minibus passengers are dissatisfied with safety

while in the vehicle.

15.3 Absence of a “culture” of public transport cont’

• Dissatisfaction result is an:– unstable customer base for public transport,– Because at any given time, a large number of

public transport users are contemplating switching to alternative transport if they can

– This low level of customer loyalty contributes to the rapid rise in car ownership and usage

15.4 Creation of a “culture” of public transport

15.4.1 Fare levels and ticketing

A “good” system can help to1. attract passengers and 2. raise the image of public transport in general

15.4.1 Fare levels and ticketing

Treatment of fares is divided into the following sections:

a) the legal frameworkb) fare policyc) comparative fare systems

15.4.1 Fare levels and ticketing cont’

a) The legal frameworkb) Fare policy• The ITP (integrated transport plan) goes on to

set out the “typical objectives” of a city fare policy:– attract the maximum number of passengers– increase the maximum revenue; and– increase mobility of the city’s residents /

accessibility

• The constraints and requirements of a fare policy are typically:– Equity (value for money) i.e. the fare paid must be

related to the value of the public transport service purchased

– fare system needs to be understandable and convenient to passengers

– increase the ease, and reduce the cost, of fare collection and control

15.4.1 Fare levels and ticketing cont’

• To achieve the national, provision and City vision of poor households spending less than 10% of income on public transport, existing – bus subsidy would need to increase by about

R40m and – taxis would need to receive subsidy to the tune of

about R650m a year

15.4.1 Fare levels and ticketing cont’

c) Comparative fare systems• Different Ticketing methods:– paper tickets, – clipcards, – season tickets and – “smart cards” of various types.

15.4.1 Fare levels and ticketing cont’

• First major step in Introducing ticketing technology:– dominant public transport operators — minibus-

taxis — to make the transition from passengers using cash to passengers using smartcards

15.4.1 Fare levels and ticketing cont’

• Three examples of smartcard ticketing technology are:– The Oyster card in London– The Ez-Link card in Singapore– The Octopus card in Hong Kong

15.4.1 Fare levels and ticketing cont’

15.4.2 Marketing, Branding and Information

a) The role of information• Good’ Information about routes, schedules

(timetables) fare systems and facilities is essential if a transport network is to attract the maximum number of passengers.

15.4.2 Marketing, Branding and Information cont’

• This information must also be backed up by:– vehicles, – logos, – publicity materials, – destination signs and a – generally positive image for the system.

• The journey does not start when the passenger gets on to the taxi or a bus or a train.

• It does not even start while waiting at the stop or station.

• It starts in the everyday subconscious, in the mindset of the user, and these attitudes are often shaped by perceptions of public transport which may not always be rational

15.4.2 Marketing, Branding and Information cont’

b) Information Requirements• Information about the services provided must

be easy to understand and be visually appealing.

15.4.2 Marketing, Branding and Information cont’

• Information includes:– the name and logo of the system– route maps giving sufficient detail of where the

vehicles actually go, also showing major streets and landmarks

– timetables for all routes. Schedules should preferably by repetitive every hour (see appendix for examples) for weekdays, Saturdays and Sundays

– fare information — how much to pay, where to buy tickets, how to use ticket issuing machines, etc

15.4.2 Marketing, Branding and Information cont’

• Information can be provided in a number of ways:– Away from the route — call centres, Internet,

published timetable booklets or route sheets, notice boards at schools, shopping centres, etc

– On the route — taxi stops, bus stops, stations — information on times, routes, fares, etc

– On the vehicle — clear destination letters, route numbers, train identification numbers, etc.

15.4.2 Marketing, Branding and Information cont’

• Another example of information that is poorly presented is the generally low standard of destination indicators on buses and inconsistent use of route numbers in South Africa

15.4.2 Marketing, Branding and Information cont’

15.5 Conclusion

• Subsidy is affordable and should be properly applied so that all citizens can benefit equally from improved public transport

• The use of a suitable user-friendly fare / ticketing system, together with an effective marketing and image-building programme can help to raise the profile of public transport, provided that there is a pre-existing level of service that can be marketed.