PURSUING COMPETITON REFORMS IN STAPLE FOOD AND BUS TRANSPORT SECTOR IN ZAMBIA

By: Shreya Kaushik and Faith MwambaCUTS

October 13, 2015 – Mulungushi International Conference Centre, Lusaka

OutlineStaple FoodKey Findings– Farmers Input Support Programme– FRA Price Setting of Maize

Bus TransportKey Findings– Bus Standards in Zambia– Fare setting process in Bus Transport– Route Rationalisation

Staple Food

Key Findings

Farmers Input Support Program (FISP)

Procedure of fertilisers procurement seem to enable participation of limited number of private fertiliser suppliers, thereby stifling competition.

This has resulted in participation of a handful of private firms in fertiliser supply in Zambia. Firms seem to have found it more convenient to collude than compete.

Farmers Input Support Program (FISP)

Goal: Infusing competition principles in public procurement of fertilisers under FISP

ApproachCCPC is currently investigating the process of procurement tender allocation to

private players under FISPCUTS would support CCPC : understanding the regulatory framework of

procurement supply and distribution process of fertiliser in ZambiaPreparing an ‘institutional guideline’ for procurement of fertiliser

Key Findings

FRA Price Setting of Maize

Reduced price volatility as variation in prices reduced by 13.5%

Prices were set at a high level, which positively impacted only a handful (28%) of Zambian farmers who are net-sellers of maize – while negatively affecting nearly half of the farming community (48%) and having no impact on the remaining 24%

High prices offered by FRA for maize increased revenue burden on Govt., already bearing high costs in subsidising fertilisers (FISP programme). It also induced farmers towards a culture of mono-cropping (of maize due to its high prices) and reduced private sector engagement in the sector

Key Findings

Goal: Understanding the floor price setting mechanism of FRA (Additional Research)

Approach:To understand the rationale & price determinations for setting of maize prices

by FRA;To make recommendations on best practices in setting the floor prices.Understand the reasons of lack of private sector participation in maize

procurementMethodology: In-depth Interviews and the FGDs of stakeholders

Key Findings

Bus Transport

Current Situation

In Zambia, specifically, intra city bus transportation is:

characterized by low quality second hand buses high load factor results in uncomfortable rides general dissatisfaction among consumers (about 70%) – fares perceived too

high for quality of service

Key Findings

Key FindingsBus Standards in Zambia

Quality Control: Lack of coherence between the fares vis-à-vis the quality of the service. Most of the buses plying in Zambia are second hand buses. The quality of the

bus and the services that they provide are generally not good.

The ‘first come first load’ principle at bus termini does little to give incentives to operators to invest in quality as they are assured of patronage regardless of the condition of the bus.

The quality control system for public buses needs to be enhanced to ensure that only buses of good quality are allowed on the roads.

Bus Standards in Zambia

Goal: to have better standards for bus seats in Zambia

Approach:Brainstorming sessions-Discussion with key stakeholder on the impact of the

lack of such standard on the consumers;Developed a way forwardDevelopment of the standard is underwayCUTS will be invited to provide comments on the draft standard

Key Findings

‘Fare setting’ process in bus transport in Zambia

Based on the data for the intra-city bus transport, bus fares have been increasing faster than the fuel price, which could reflect that the fares may have been pushed by other factors outside fuel.

However, if fuel is the major input into the fares, then the bus operators have generally been able to utilise the fare setting regime to their advantage

The results of the survey show that the average fare per trip for the intra-city route is about ZMW4.94 (about US$0.82), which is higher than in other countries.

Commuters spend about 8.6% of their income on transport.

The respondents in the intra-city transport indicated that they do not have any bargaining power to negotiate fares. Commuters are thus generally not satisfied with the fare setting process

In the intra-city transport sector, while the operators have largely benefited from the pro-competition reforms, the fare setting process is stilled skewed in the operators’ favour.

This calls for a relook at the fare setting process or a closer enforcement of the current system to ensure better representation of passengers

Key Findings

‘Fare setting’ process in bus transport in Zambia

Goal: to have a process based fare setting mechanism for bus transport

ApproachWe have prepared a discussion paper on international best practices in bus

transport reforms which touches on fare setting processesWe have shared the discussion paper with the ministry of TransportAlready there are plans underway for having a scientific formula for fare setting.

So CUTS findings and suggestions will be incorporated in the same

Key Findings

Route rationalisation

There is currently no route allocation framework in Zambia: operators are licensed as intra-city and inter-city operators and can operate anywhere on such routes.

This reduces accountability for the players as they do not have any incentives to invest in goodwill and good practices

Once an operator is licensed they can operate anywhere based on profitability.

This results in other areas of town which are not deemed profitable to have limited availability of public transportation.

Key Findings

Route Rationalisation

Goal: to identify the reasons for the lack of route rationalisation ( Additional Research)

Approach;Undertaking a further research on the winners versus losers approach on

the lack of route rationalisation in the city of Lusaka

Key Findings

THANK YOU!!!(shk@cuts.org and fpm@cuts.org)