Benjamin Ntaganira, a lawyer by profession replaced Esdras Nkundumukiza as the Managing Director of Onatracom, in the first major managerial shake-up of the public transport operator in six years.
The government owned bus service company saw its market share shrink significantly following the liberalisation of the market, which allowed the operation of privately owned express buses.
“As a public utility service, Onatracom management failed to cope with the increased competition from private transport companies. We expected the company to concentrate on providing transport on the rural routes as its primary target,” the Minister of Infrastructure, Albert Nsengiyumva, said.
With a loss of Rwf342m and a liability of Rwf2 billion in 2010 due to the thinning clientele base and the aging bus fleet, it is increasingly becoming difficult for the company to remain competitive.
The company’s manual mechanism of storing its financial information also calls for change of strategy if it is to operate as a going business concern.
The minister ushered in the new management and tasked it to restructure the company to make it a profitable business entity again.
In an interview with Business Times, Nsengiyumva said that regardless of its poor performance, Onatracom services are still vital and needed.
“Since it is a public service provider, Onatracom received subsidies from government because it is not profit oriented. However, it was expected to cover its costs by tending the routes outside Kigali which are neglected by the private companies, but it did not do this sufficiently,” the Minister said.
“The primary target of the interim management is to develop a new business model, propose it to the government so that we can implement it as soon as possible and recover the company.”
The company’s new Managing Director said that his team is underway inspecting the structures of the company.
“We are doing our best to achieve our mission within the deadline,” he said.
“We are working with Ernst and Young who are carrying out a study on the sustainability and durability of Onatracom, which we shall use extensively to determine the solution to the company.”
When asked whether privatisation could be one of the solutions to save the ailing operator, Ntaganira said it is not easy to suggest a particular solution at the moment.
“At the moment, we are concentrating on putting as many buses as possible back on the road.”
The outgoing Managing Director, Nkundumukiza, told Business Times that Onatrcom needs new plans to ensure that the company’s image is restored.
“In the past, we were competitive on the market. From 2005, we initiated the express buses connecting Kigali to provinces and we operated as a monopoly. The money we collected then was enough the bridge the gap left by the losses accruing to the rural areas,” Nkundumukiza said.
However, he said, the rural routes became very costly and inconsistent because of few travellers and the operator made big losses again with no other subsidies to bridge the loss.
Onatracom operates 178 busses, but 117 of them are in good running condition. The company used to operate 57 per cent of the total bus network in Rwanda, but by 2008, its coverage decreased to 25 per cent.
As part of its arrears, Onatracom owes Rwanda Revenue Authority and the Social Security Fund of Rwanda a combined debt of Rwf1.118 billion.