A recent study by EY, commissioned by the Localisation Support Fund and the National Association of Automobile Manufacturers of South Africa (Naamsa), found that South Africa's bus industry is underperforming its potential. The industry could contribute significantly to the economy and create jobs with the right incentives, localisation, and public procurement policy. The study identified several structural constraints limiting the sector's potential, including fragmented procurement and inconsistent application of the designation framework.
The study noted that the bus industry faces several challenges, including the continued importation of fully built-up vehicles, where completely knocked-down assembly is legislatively required. This has created a low-volume, high-cost equilibrium that constrains manufacturers and procurers alike. The study also found that the absence of designation requirements for electric and hybrid buses is a significant constraint. These factors have resulted in a sector that is not reaching its full potential.
To unleash the potential of the bus manufacturing industry, the study recommends strengthening designation and enforcement by raising the local content threshold to 85% for diesel bus bodies. The study also suggests bringing electric and hybrid bus bodies within the designation framework over a phased five-year period. Standardising tender fields to include local content as a mandatory specification and improving the technical training of procurement adjudicators are also recommended.
The study proposes clustering smaller municipalities by operational terrain and service type into structured buyer groups, allowing large metros to procure independently. This approach could unlock 10-15% in capital cost reductions and create the volume predictability manufacturers need to justify tooling investment and local capacity expansion. The study argues that enforcing existing rules is the highest-impact, lowest-cost lever available to improve the sector's performance.
The study also suggests operationalising African Continental Free Trade Area (AfCFTA) vehicle rules of origin, aligning cross-border fleet financing with municipal procurement calendars, and positioning South Africa as a regional bus body manufacturing hub. This could help deepen localisation, grow jobs, reduce costs, and expand regional exports. The sector already has established body builders, a functioning designation framework, and emerging electric mobility opportunities.
South Africa's bus sector comprises private operators, municipal bus services, bus rapid transit systems, and private intercity bus services. The sector plays a critical role in providing public transport, with private operators such as Putco and Golden Arrow Bus Services operating under provincial government contracts. Municipal bus services, such as Johannesburg Metrobus, and bus rapid transit systems, like Rea Vaya and MyCiTi, also contribute to the sector.
The study warns that the sector cannot afford further drift, as this could lead to fleet ageing, capacity attrition, and growing import dependence. However, with coordinated reform, South Africa can grow jobs, reduce costs, and deliver more affordable and reliable public transport. The study's findings highlight the need for government, industry, and the procurement community to act with coordination and sustained commitment to unlock the sector's potential.
Key points
- The bus industry could contribute R88bn to GDP with the right incentives and policies.
- Strengthening designation and enforcement could improve the sector's performance.
- Clustering municipalities and operationalising AfCFTA vehicle rules of origin could unlock cost reductions and growth opportunities.
