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Kenyan government shuts down bus services that threaten matatu networks

By Morris Kiruga, in Nairobi
Posted on Friday, 4 October 2019 16:08

Bus start-ups want to disrupt Kenya's matatu (mini bus) bus routes. REUTERS/Noor Khamis

Efforts by two tech firms to disrupt Kenya’s chaotic public transport system suffered a blow this week after the government shut down their operations over a licensing row.

Both Little Shuttle and SWVL, which offer bus services that have been gaining in popularity in Nairobi, announced that they would cease operations from Tuesday, October 1.

The National Transport Safety Authority (NTSA) said that the buses both companies use for their services are not licensed for commuter service.

  • “Little Shuttle and SWVL operate vehicles contrary to the provisions of the Public Service Vehicle (PSV) regulations. The vehicles under these hailing app companies have acquired a Tours Service Licence (TSL) but are engaging in commuter service within Nairobi, therefore contravening the terms of the TSL,” NTSA director general Francis Meja said.
  • He said his agency would support the two companies “when they seek to comply with PSV regulations,” which were put in place to create some order in Kenya’s chaotic public transport system.
  • PSV rules require a company or a savings and credit cooperative society (SACCO) to operate a minimum of 30 vehicles, which would severely limit bus-hailing services.

This forces owners to work together in formal groups with designated routes, but it has also encouraged collective punishment by the transport regulator.

Bible followers

“They [NTSA] are doing their job as per what is listed in their bible,” Kamal Budhabhatti, the chief executive of Little wrote in a pained email to users. “I would have appreciated that they open a dialog with technology companies like us on how to work together and change the face of public transportation in our country.”

  • Safaricom-backed Little, which has cab-hailing operations in four countries, launched its bus-hailing service earlier this year.
  • SWVL, an Egyptian company founded in 2017, officially launched operations in Kenya in August with a promise to invest KSh1.5bn ($14.5m).

Convenience and competition

Shivachi Muleji, SWVL’s general manager for Kenya, said that the service would seek to “match the convenience of ride-hailing services but at the same time matching the capacity provided by the traditional matatu [mini bus] industry”.

  • The services have been popular, especially with users who wish to avoid Nairobi’s central business district, where most matatus have their terminus, forcing commuters heading to other parts of the city to take a connection.
  • By allowing users to pre-book a spot on a bus with a defined departure time and fares, the services have sought to introduce greater predictability.

Critics of the cartels

Budhabhatti, in his email, hinted that the true resistance to the new bus service could be from the matatu industry, which is wary of losing out to new services backed by tech the way taxis did.

“I am not sure if the decision to stop us was from the authorities or they were under pressure from the public transport cartels,” Budhabhatti wrote.

Players in Kenya’s transport system have resisted digitisation before.

  • In 2013, the NTSA tried to push through a cashless initiative that would force matatus to accept fares only through electronic payment systems.
  • The move failed primarily because cashless systems eliminated a primary source of money for drivers and touts, and could have forced them to depend on salaries and wages.

Budhabhatti argues that the current resistance comes from a misunderstanding of how bus-hailing services work.

“The buses we have on our platform have a license and have been providing corporate services all these years. All we did is we automate it,” he tells The Africa Report. The “authorities are comparing this model to matatus and that is why they are telling us that we do not have the right licenses,” Budhabhatti says.

“They would like us to apply for a transport SACCO. We have explained that we are a platform aggregator and not a SACCO or transport company.”

Laissez-faire regulations

The Little CEO would prefer a laissez-faire model, similar to what mobile-money platform M-PESA had at its launch in 2007, with the government working with the innovators to draft new regulations.

“As it [M-PESA] started helping Kenyans, the central bank did not stop Safaricom. They worked together to formulate a legal model. I would have appreciated a similar approach on this matter,” he wrote.

The recent development comes just months after drivers working with four cab-hailing services – Uber, Bolt, Little Cab and Maramoja – went on a nine-day strike to protest what they termed as exploitative rates.

In July, drivers congregated daily in Nairobi’s Uhuru Park, demanding better fares and also asking government to intervene to enforce the safety standards for Uber’s budget taxis.

  • As competition for fares has heated up in Nairobi, the cab-hailing services have diversified their offerings, adding budget options that charge cheaper fares for the same distance. Drivers said this was done without consultation and impacted their earnings.
  • Safety concerns were raised about Uber’s cheapest offer, Uber Chap Chap (Swahili for ‘Hurry hurry’), which uses 800cc Suzuki Altos.
  • The strike ended after drivers signed a deal with service providers and the government for better pricing.

As cab-hailing services have also added other services, such as food and parcel delivery, and transport via boda bodas (motorbike taxis), nearly each new offering disrupts a traditional provider.

But new service providers also have to deal with changing regulations, like in 2018, for example, when Nairobi governor Mike Sonko banned motorbike taxis from the city centre.

For Little’s Budhabhatti, driver conditions are key to the company’s growth. “Our drivers are never striking, since our prices are better and as per the market standards. So when other app drivers are striking, Little was up and running,” he says.

Driver disappointment

However, one complication of rid-hailing businesses is that a significant number of drivers are on more than one platform.

Bernard Matheng’e, a driver with one of the cab-hailing services, tells The Africa Report: “Because of low margins we have to try and join all the services and work longer hours.”

Another driver, Stephen Gacheru, adds: “We treat users the same way these companies treat us. I am a listed driver on more than one platform, and it matters to me which one each hailed ride originates from.”

While such concerns have not been raised by drivers of the bus-booking services, the government’s move to force the tech companies to shut down will most likely complicate their plans to disrupt the transport sector.

Bottom line: The resolution of the question of whether they qualify to fall under matatu rules or under corporate transport, for example, could have serious ramifications to the bus-hailing services’ business models, where routes depend on demand rather than designation.

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