Local investor sought for Onatracom

The air around Onatracom premises in the City of Kigali suburb of Nyamirambo smells of rusty metal. Several buses, some noticeably beyond repair, are parked in a graveyard-like pattern.
Members of the PAC during a visit to Onatracom last Wednesday. (Timothy Kisambira)
Members of the PAC during a visit to Onatracom last Wednesday. (Timothy Kisambira)

The air around Onatracom premises in the City of Kigali suburb of Nyamirambo smells of rusty metal. Several buses, some noticeably beyond repair, are parked in a graveyard-like pattern.

When I visited the public transporter with members of the parliamentary Public Accounts Committee Wednesday morning, a team of mechanics were frantically trying to revive a couple of buses, some of them looked like they had been off the road for months or even years.

Their frenzied efforts, to ensure that not another bus is added on to the big number of those grounded inside the expansive yard, appeared symbolic of the public transporter’s on-going struggles to stay afloat.

Out of a fleet of 160 buses (as per the 2013 Auditor General’s Report), only 40 are still operating. Even those that can move, only 32 meet what can be termed as public transport standards.

There were mixed reactions among the visiting MPs. Some said that the company still had a chance—a position held by the management of the ailing transporter—while some expressed skepticism.

A lot of problems have piled on Onatracom. According to the 2012/13 Auditor General’s Report, the company suffers “liquidity and operational problems that forced it to scale down its operations, almost to the point of ceasing to operate.”

In 2013, the government decided to privatise the company, as the only way to turn the loss-making entity into a self-sustaining and profitable business within three years.

Three foreign companies; Seven Solutions Ltd, KPMG International and SMEC International expressed interest, but all pulled out. John Bosco Murasanyi, the acting Director General, told the legislators that the foreign investor who had showed interest pulled out after failure to strike an agreement on “some issues.”

Now the Government has invited local investors to takeover of Onatracom whose debts accumulated to a staggering Rwf5 billion since 2008.

Even though the debt has since been reduced to Rwf1.7 billion, thanks to government intervention, some MPs compared the company to “a bedridden patient” and doubted whether it could be salvaged, saying the best option was to liquidate it.

But Murasanyi remains optimistic that Onatracom’s fortunes can be turned round, regardless of its current situation.

“There are measures to revamp the company; we strongly believe that the existing issues can be solved once and for all, hence dissolving Onatracom is not the ultimate option,” he said.

Recovery plan

According to Murasanyi, after the search for a foreign investor hit a snag, management opened doors for local investors to revamp the company through a private public partnership.

Sunday Times understands that Rwanda Federation of Transport Co-operatives (RFTC), a local transport company, has since submitted its business proposal. The proposal is being studied by the Rwanda Development Board (RDB).

“Foreign investors did not show intent of taking over, that is why we chose to look for local investors who are even conversant with the business,” said Murasanyi.

Francis Gatare, the Chief Executive Officer of RDB, confirmed that a proposal had been submitted to the investment unit of RDB.

“Onatracom and the supervising ministry asked RDB to look into the business proposal for the private management and soon we shall provide our feedback,” Gatare said.  

He hinted at endorsing the proposal, saying handing Onatracom to private hands would improve efficiency and ensure its recovery.

“Transferring management into private investors would therefore revamp its efficiency. This is the way to go,” said Gatare.

The Government committed to provide Rwf2 billion to purchase new buses and repair some buses once new management is in place. According to Murasanyi, Government will continue to have a say in Onatracom operations in order to safeguard public interests.  

What went wrong with Onatracom?

It should be noted that Onatracom was established to serve the public—especially areas that are not attractive or profitable to private transport companies. This has, in one way or another, led to financial and mechanical problems that have brought down Onatracom, according to Murasanyi.

The financial challenges faced by the company are partly due to the old fleet that spend more time in the garage than on the road, hence unable to operate designated routes and make money. The AG’s report indicated that out of 143 buses, 105 of them were past their economic lifespan and need repairing, while 70 were beyond repair as of 2012.

Yet by September 2013, Onatracom could only operate 27 routes from 130 in 2007.

“Revenues declined significantly over the last 5 years from Rwf5 billion in 2008 to Rwf 1billion in 2012, yet the cost of maintenance and service of an old fleet of buses was high. This consequently wiped out most revenue collections over the years,” the report said. Onatracom found itself unable to pay its obligations as suppliers threatened to withdraw services and sue. That was when the Government extended a bailout package of Rwf5 billion to help pay suppliers.

While the company managed to pay salaries of its 150 employees, it failed to meet its statutory obligations such as remittance of pension savings and medical insurance. The AG recommended that the survival of Onatracom required evaluation of various investment options, the basis of which the Government chose a private public partnership.