Uber Kenya expansion may hit roadblock over rate row

By Herald Aloo
Posted on Wednesday, 21 September 2022 16:39

An Uber sign on 12 September 2022. (AP Photo/Jeff Chiu)

Uber has joined other digital taxi-hailing apps in expanding to Kenya’s far-flung cities. The company intends to increase ridership and cement its dominance in the country where affordability is highly valued.

The US-based company has launched its business in Kisumu, Nakuru, Eldoret and Naivasha, expanding on its presence in Mombasa and Nairobi. 

Uber’s expansion, however, comes amid rife competition and high commission rates – approximately 25% – which has squeezed drivers’ earnings.

Drivers in the four cities, including those who operate private taxis, tell The Africa Report that they welcome Uber’s expansion drive, but will find ways to dodge paying the commission.

Numerous drivers on various digital taxi driving apps, including those using less costly platforms like Bolt and Indriver, are switching to the traditional business model to evade paying the commissions and protect their incomes.

What is the point of paying commission for all the trips if I can negotiate directly with customers offline for even a better fare?

They often ask customers to cancel their request then negotiate for a better fare, a literal indication of affordability preference over safety. “Most drivers are now trying to build their own customer base using these apps,” says Martin Njenga, a cab operator in Nakuru.

Victor Onsongo, who has been in both the private and digital tax business for four years now within Kisumu, says: “Yes, I will register as an Uber driver just like we do with other apps, but the high commissions and fuel price are hurting us, so we have to find survival tactics to increase income. What is the point of paying commission for all the trips if I can negotiate directly with customers offline for even a better fare?”

Uber Kenya declined to disclose the ride cancellation trend on its app in Kenya, citing exposure to competition risks.

Lobbying pressures

When earnings were slashed in the wake of the Covid-19 pandemic, taxi drivers with support from their lobby, the Digital Taxi Forum, threatened to switch off their services if their demands for fare increase and slashed commission payable were not met.

The situation has been compounded by the increase in fuel prices, car service charges, and high inflation rates, which is eroding drivers’ income. Petrol prices in Kenya jumped to a new level of KSh179 per litre last week, while diesel increased to KSh165 per litre after fuel subsidy withdrawal.

However, ride-hailing firms like Uber are hesitant to revise their fare upwards over fears of impacting ride demands. Uber says it has increased fare severally this year, but declined to reveal the details of the fare reviews.

We have implemented several fare increases this year alone, with the latest increase being announced this past July,” says Imran Manji, Uber head of East Africa.

“We recognise the pressure drivers are under to keep their businesses profitable. It’s important to understand that fares do fluctuate as a normal part of any business based on various factors such as seasonality and the macroeconomic environment,”  he says.

Operation costs

Interviews with drivers however shows that Uber marginally increased the minimum fare by between KSh10 to KSh160 only in July for its low-priced option, the Uber ChapChap, the default service for most Kenyans. The rate charged per kilometre increased by one shilling to KSh26 from KSh25. 

Still, the rates do not match the operation costs, drivers say. Kenya has proposed to cap the commission paid by drivers to digital taxi operators at 18% per trip to quell the disgruntled drivers who, for a long time, have been inconvenienced by high charges.

The new rule published by Transport and Infrastructure Cabinet Secretary James Macharia under the previous government borrows a leaf from China and India where drivers also complained about similar exorbitant commissions.

Some drivers say they want the cap to be as low as 10% to protect their wages. While some apps have welcomed the 18% capping in Kenya, Uber is against the new regulation.

Some aspects of these regulations, such as the commission reduction and requiring companies to be registered in Kenya, are not conducive to doing business in Kenya and are not good for drivers or riders as they deter foreign investment into the country,” says Manji.

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