BRIEF OVERVIEW OF AB350

1.1) From 1999, the Eastern Cape Department of Transport (EC DoT) entered into a Negotiated Contract with individual small bus operators. In 2001, the individual small bus operators were invited by Professor Mazibuko who was in the Premier’s Office then. He proposed that a single legal entity for the individual bus operators would be a more viable proposition for the entire Eastern Cape as against isolated individual operations. The President of Eastern Cape Transport Network (ECTN) then was Mr Viwe Malusi and the Secretary was Mr. Simlindile Hintsa.
1.2) Inter-Buy (a company organised by bus operators to source buses on their behalf), offered Lease Agreements to the individual small bus operators to service the Contract. Sadly, Inter-Buy collapsed due to use of old buses which were not roadworthy.
1.3) Then, individual bus operators went to lease buses from Alton Coaches as an alternative to Inter-Buy. This arrangement also collapsed. Then there was a change in the leadership in 2004; Mr Simlindile Hintsa was elected as the new Chairman.
1.4) Eastern Cape Transport Network (ECTN) encouraged individual bus owners to form Legal Entities to purchase buses to service the routes that were part of the Contract, under the new ECTN Leadership. Out of six regions, only two managed to form legal entities, i.e. Wild Coast (Pty) Ltd (former Wild Coast – Mt Ayliff) and Zamukulungisa (Pty) Ltd (former Eastern Region, Mthatha).
When this new development was presented to the EC DoT, it was realised that it would still not work if only two regions were prepared to participate.
1.5) The EC DoT proposed and encouraged the individual bus operators to form a single legal entity across the province. Simultaneously, the National Department of Transport invited all Small Bus Operators across the country to Johannesburg to brief them about the new Transport Legislative Framework (DTI Document) during the era of the late Honourable Minister Dullah Omar’s. Again, the late Minister proposed/ suggested that the Small Bus Operators should form an Association that is going to represent them in the formulation of the bus sector Broad Based Black Economic Empowerment policy. Indeed, two members (Messrs Hintsa and Cewana) were elected to represent the Eastern Cape Bus operators in the National Transport Forum.
1.6) The participation of the two members in the National Transport Forum resulted in changing the name from ECTN to Eastern Cape Peri Urban Bus Operator’s Association (ECPUBOA) which was led by Mr. Simlindile Hintsa as a Chairman. Bus operators resolved to form Associations per the existing Local and District Municipal Boundaries in the Eastern Cape. The District Municipalities served as Regional Associations. An Interim working committee was elected to facilitate the transformation process of the EC bus operators. To elect a Provincial Bus Operator’s Association, four delegates were nominated per region and a general meeting was held that elected the first Provincial Executive Committee of ECUBOA at Windsor Hotel in Mthatha.
1.7) This new concept (ECPUBOA) was presented to the EC DoT for their “buy-in” and recognition. The EC DoT welcomed the initiative and proposed to team up with the Association to conduct six (06) Road Shows to all regional DoT offices for all the bus operators. The purpose was to make sure that all the bus operators are aware of this transformation process, and that the process is transparent and inclusive.
1.8) The EC DoT advised the bus industry to discuss the formation of a single Legal Entity of their choice. The bus operators agreed to form a single legal entity across the province encompassing all bus operators. The EC DoT supported the Association by conducting the Route Viability Study to 166 Routes that were previously contracted by the Department to the individual bus operators.
1.9) The EC DoT invited Development Bank of Southern Africa (DBSA) and Eastern Cape Development Corporation (ECDC) partnership for financing purposes of the emerging transaction. The three parties engaged the services of PricewaterhouseCoopers (PwC) to assist ECPUBOA to establish a legal entity in 2005 financial year.
1.10) In July 2005 Africa’s Best 350 Ltd (AB350) was registered with the Registrar of Companies as a Public Company with Registration number 2005/021846/6, and all ECPUBOA members were entitled to become Shareholders of the company. For one to be a shareholder, the requirements were as follows:

• Must be a member of a local bus association
• Pay a sum of R2 500.00 (Two thousand Five hundred rand) as shareholding
• Can only join with a maximum of two routes that were contracted

1.11) The Chairpersons of the Regional Associations became members of the first Board of AB350.
1.12) The main purpose of the company was to purchase new buses to service 166 routes that were identified in the Route Viability Study and were previously contracted.
1.13) Tenders to start a new bus services were invited in July 2005 and included were:

• Bus Suppliers
• Financial Institutions
• Tyre Suppliers
• Fuel Suppliers
• Insurance Services and Cleaning Services

1.14) Business Plan was prepared, developed and produced by Maeteko Management Company.
1.15) The Recruitment process of Key Personnel started, the projected commencement date then was 01 November 2005 which did not materialise since there was not enough funding as projected in the Business Plan.
1.16) The preferred main service providers were Scania for bus supply and Standard bank to finance, but this deal could not succeed due to various technical reasons.
1.17) On the Failure of the first attempt to purchase buses, the then Honourable MEC of the DoT, Mr Thobile Mhlahlo intervened to take the process forward. In agreement with ECDC and DBSA it was agreed that additional financing institutions are approached. AB350 approached Industrial Development Corporation (IDC), National Empowerment Fund (NEF) and Nedbank. A Consortium of Financing Institutions, namely IDC, NEF, DBSA, ECDC and Nedbank was formed in 2006 to consider the transaction; with IDC being the lead arranger of the transaction.
1.18) Requirements, Preparation and Planning by the Financing Consortium for this Transaction was implemented as follows:

• Verification of Route Viability Study was conducted
• Visiting and confirmation of existing and proposed Depots in consultation with the firm of local Quantity Surveyors, appointed by AB350 as Project Managers for Depot Development.
• Impromptu visits to various individual bus operators to confirm their views.
• Visits to preferred bus Suppliers
• Consulted extensively with the EC DoT
• Conducted Due Diligence exercise of AB350
• A Term Sheet was developed and endorsed by all parties. The Term Sheet stipulated 31 Conditions Precedent that AB350 was required to comply with including Securities, to obtain the necessary funding.

1.19) The role players agreed that the project be implemented in three phases over the next three years, where 58, 65 sitter buses will be purchased for the 1st phase to operate 55 routes. The second phase would have 59, 65 sitter buses to operate 56 routes in year two and third phase would have 55; 65 sitter buses to operate 55 routes in year three. The Financing Consortium approved the Deal/Transaction for Phase one to the value of R65 million.
1.20) The DoT supported AB350 by granting R43.3 million towards establishment of the company, and further pledged R29 million subsidy per annum.
1.21) AB350 contributed R825 000.00 for Equity and R465 000 of Shareholding.
1.22) Out of the list of 31 Conditions Precedent and Securities required from AB350, AB350 needed to submit a Shareholder’s Agreement that was signed by all Shareholders including signed Security Transaction Documents by all parties from the Financing Consortium.
1.23) Nedbank withdrew from the Financing Consortium (FC) after all CPs had been met in September 2007 and then Scania Finance was approached to take over Nedbank gap. Scania Finance had to review the proposed agreements and after three months, they approved the transaction and joined the FC.
1.24) Executive Management of AB350 was appointed between September and October 2007. A depot that was previously used by TRTC was renovated in Mbizana while three other depots in Mount Frere, Mthatha and Matatiele were constructed from the grant funding for phase 1.
1.25) The Logos of AB350 and financiers have been written on the buses. Commitment to finance by FC was made to cabinet on 12 February 2008 and a signing ceremony of the transaction was held on 4th March 2008.
1.26) The company was formally launched on 01 April 2008 in Mbizana by the then MEC for EC DoT, Honourable Mr Thobile Mhlahlo after the delivery of the first 13 buses which started operating in March 2008 in Mbizana.
1.27) The second batch of another 13 buses was delivered in Mount Frere and started operating in April 2008.
1.28)The third batch of 15 buses was delivered for Mthatha and operated in September 2008.
1.29) The fourth and the last batch of 17 buses was delivered in Matatiele and operated in November 2008. All the four depots were implemented as planned in 2008 and operated from temporal facilities. Construction of all phase I depots was completed in 2009 and all relocated to permanent facilities.
1.30) In May 2009, 18, 65 sitter buses were financed and approved by a joint venture of IDC and Scania Finance. The delivery of these buses enabled the company to start phase II. A temporal depot was acquired and staff appointed to run 17 routes in Chris Hani district covering, Lukhanji, Emalahleni, Ntsikayethu and Sakhisizwe municipalities.
1.31) The implementation of Queenstown was followed by further delays in approval of further financing as the FC had to satisfy itself on the viability of the business. Thus, the second and the third drawdowns were only implemented in 2010.
1.32) Over the two-year period of operations, the company lost eight buses in different instances of arson in various sleeping grounds.
1.33) In May 2010, the Butterworth depot started operations with 10; 65 sitter buses which were rolled out until the end of August 2010 with a total of 25 routes and 25 buses operated.
1.34) It is over the same period that the company leadership started a formal relationship with the Taxi industry which culminated into the establishment of the Eastern Cape Bus and Taxi Business Chamber (ECBTBC) with its leadership represented by both public transport players in the province.
1.35) In October 2010, the last drawdown of 16, 65 sitter buses for phase II was approved and the depot in Lusikisiki started operating in October 2010. In total, the AB350Ltd had a fleet of 117 buses.
1.36) The company lost another bus in July 2011 from fire and decided to acquire two new 65 seater buses from Mercedes Benz. This was for the first time that a different product either than Scania was acquired. The company then had 118, 65 seated buses in total.
1.37) The relationship established in the ECBTBC culminated in the establishment of a non-profit company named One Future Development 46 c.c which won a scholar transport tender in the Eastern Cape that was managed for three years until the end of the year in 2014, when the contract was not renewed.
1.38) The scholar transport model which was a brain child of AB350Ltd became a very successful model which won a national award, though its administration had challenges.
1.39) On the 16 March 2014, the AB350Ltd celebrated six years (06) of its operations which was a very huge and successful event attended by more than 8000 people and was addressed by the ANC provincial chairman and MEC for Finance Hnr, Mr. Phumulo Musaule who later in the same year became a provincial Premier of the Eastern Cape.
1.40) Towards the end of 2014, the provincial government approved the implementation of phase III as per initial agreements. Though the first drawdown of 10 routes was approved and 10 buses were purchased by AB350Ltd. The routes were formally handed over on 04 October 14 in Engcobo by the Hnr. MEC for Transport and Safety Ms. Weziwe Tikana. This marked an establishment of eighth AB350Ltd Depot in Engcobo, and an increase of the fleet to 128, 65 seater buses.
1.41) A long-standing maintenance agreement with Scania was terminated in March 2015, resulting in AB350Ltd establishing its technical unit with its staff and equipment. This was a landmark in the growth of the company.
1.42) On the 29 August 2015, a disaster for the first time fell, when a bus with forty-four (44) passengers rolled at Nkelekethe in Willowvale and killed thirty-four passengers and a driver. May their souls rest in peace.
1.43) In July 2015, fifteen more routes were approved by the DoT for AB350Ltd. Loan was acquired from Standard Bank to purchase 17, 65 seater buses to cover the routes and provide spare capacity of the fleet. The buses were formally handed over by the Hnr. MEC Ms. Weziwe Tikana at Gotyibeni Village in Tsolo on the 14 October 2015. The fleet size increased to 145 buses.
1.44) This event was combined with the official handover of the site acquired from Gotyibeni community to build a workshop to be used as a Bus Repair Centre. This establishment was financed by National Empowerment Fund (NEF) and Masisizane Fund (Old Mutual loan facility). The workshop is intended to start providing its services in 2017 with AB350Ltd being the main client and other clients from other heavy duty transport companies.
1.45) AB350Ltd re-registered as private company in March 2015, since it has become AB350 (Pty) Ltd with new company registration number 2005/021846/07. The company is exempted VAT.
1.46) The company won a bronze award as Best Established Black business on the BBQ National Business awards in 2012.
1.47) The company prides itself that it is accredited and a member with the following institutions:

• South African National Small Bus Council (SANSBOC)
• South African Road Passenger Bargaining Council (SARPBAC)
• Transport Education Training Authority (TETA)
• Unemployment Insurance Fund
• Workmen’s Compensation Fund
• Allows union membership
• Works with Traditional Leaders and Councillors

1.48) AB350Ltd has its Head Office in Mthatha and is fully operational, see the attached slides of Organogram. The Head Office is led by the Executive Chairman’s Office and administratively headed by the Chief Executive Manager and various heads of units.