Financial feasibility of Sandton bike-sharing scheme doubtful, study finds

7th July 2015 By: Natalie Greve - Creamer Media Contributing Editor Online

Financial feasibility of Sandton bike-sharing scheme doubtful, study finds

Photo by: Bloomberg

While considered technically feasible, a recent government-sanctioned study by engineering consulting firm GIBB has suggested that a proposed bicycle-sharing schemes (BSS) in Johannesburg may prove to be financially unworkable, with income from the scheme unlikely to cover its operational costs.

This followed the commissioning of a technical and financial assessment of the viability of piloting a BSS by the City of Johannesburg (CoJ), with the desired outcome being a sustainable business model and contract specification.

Addressing delegates at the Southern African Transport Conference on Tuesday, GIBB traffic and transportation manager ‬Lize de Beer, whose company was last year tasked with the investigation, noted that the scope of the study was limited to five potential lower- to middle-income areas: Diepsloot–Fourways, Alexandra–Sandton, parts of the central business district and Soweto, and the route linking the campuses of the University of Johannesburg and the University of the Witwatersrand.

The study analysed demand, topography, infrastructure, technology options and operational models for all five areas and narrowed down the Alexandra–Sandton area for further consideration and financial analysis.

According to De Beer, it emerged that, for an Alexandra–Sandton BSS of 300 bicycles, the operational subsidy for a manual – or manned – system with reduced staff was estimated at some R2.9-million a year, or around R9 500 per bicycle.

The implementation of a BSS of 300 bicycles and 30 BSS stations to link Alexandra and Sandton was further estimated to require upfront city funding, grants or commercial sponsorship totalling R8.8-million for the recommended manual system.

According to the study, the primary reasons for the estimated subsidy requirement was the low estimated uptake of cycling, which was based on current cycle mode shares in Johannesburg.

“The current cycle mode share in Johannesburg is considered to be low mainly as a result of the relatively high number of long distance trips owing to the city’s relatively low density and historic spatial development patterns, as well as a significant proportion of shorter distance trips more conveniently served by walking.

“There are many other factors contributing to lower cycle mode shares, not specifically quantified in this study, such as the lack of safe segregated bicycle facilities and lack of a well-established cycling culture,” the study read.

De Beer added that there was likely to be low cost recovery through fees as a result of the target market’s affordability level.

Higher fees would make the bike-sharing option more expensive than the current competing public transport fees and was thus expected to reduce the uptake.

“While it is acknowledged that cycling in Johannesburg comes off a low base and might, therefore, be expected to increase rapidly with the provision of safer cycling infrastructure, there is limited local data that could be used to support assumptions on significantly higher bicycle mode shares materialising as a result of the provision of BSS.

“Before making optimistic assumptions on potential future demand, it is recommended that a local stated and revealed preference study be commissioned that can estimate the factors that influence the propensity to cycle in Johannesburg, with a higher level of confidence,” she noted.

Such a study, De Beer argued, would also be “invaluable” in identifying the optimum strategy to increase cycling in Johannesburg.

Given the uncertainty of demand, the GIBB study suggested that, rather than the provision of a R2.9-million yearly subsidy by the CoJ, the city could, on a yearly basis, buy and give away 1 350 bicycles worth R2 150 each, spending the upfront capital costs of a minimum of R8.8-million either on dedicated bicycle infrastructure to improve cycling safety or on community educational and safety campaigns.

Moreover, to improve the recipient community’s ownership and accountability for the assets made available, the city could also consider a distribution model where community members “earned” bicycles in exchange for work done to improve their communities and the environment.

Other options that could increase access to bicycle ownership, she asserted, included the facilitation of microloans to finance bicycles or shared ownership clubs similar to a “stokvel”.

“By subsidising  50% of the cost of the bicycle, the city can provide affordable access to bicycle ownership to 2 700 community members a year, for the price it would cost to subsidise the estimated 300 bicycles required to operate the Sandton–Alexandra BSS.

“At a 50% sponsorship, each recipient would need to pay in between R50 and R60 a month, which is in line with the recommended bike-share fee that would make the cycling option attractive enough to the targeted community, relative to the existing available modes,” the report stated.

While concluding that bike-sharing was not financially feasible in any of the five study areas specified to be assessed, De Beer held that this did not necessarily mean that the system could not succeed commercially in a high-income business node, such as Sandton or Rosebank, where the assumptions concerning the type of system – and therefore its running costs and the fees that users may be willing to pay – were likely to be “very different” to those assumed in the study.

“However, a purpose-designed stated preference survey would be extremely valuable to better understand the demand for the slower modes of transport, which includes walking and cycling, so that improved demand models can be developed to forecast mode choice under different future cycling policy scenarios,” she concluded.