Uber-economics and changing dynamics in public transport sector

I am the grandson of a taxi driver from Mombasa, so I can be forgiven for being partial to them. I know I am home when I land in Mombasa airport and the taxi drivers at the arrival lounge welcome me home.

In the 2017 gubernatorial campaign, the airport taxi drivers asked me how I could help improve their businesses. I gave a rather flippant response and said “join Uber”.

They were furious. There is a raging war between Uberdrivers and the traditional yellow cab drivers. Taxi drivers believe that Uber is driving them out of business. Uber drivers are not very popular at the airport. Airport taxi drivers claim that Uber drivers have unfair advantages.

Uber drivers do not pay fees for being stationed at the airport, no parking problems, they just drive in and pick up passengers while the cabbies have been waiting for hours for that elusive single client.

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They, too, have a point. But the client is always right, and if s/he chooses Uber, then how can you stop them? I still feel a little guilty when I take an Uber at the airport.

I was forced to reflect on my comment “join Uber.”  I was both right and wrong.

There is no doubt that Uber has changed the face of modern personal transport. It is cheaper, safer, I can track my kids as they go off in an Uber, instantly available on call, shorter waiting period, cleaner, no bargaining... the advantages are endless.

No wonder many people do not use their cars anymore, they prefer Uber. It’s just more efficient. Taxi drivers need to set up their own Uber like app.

Ten hours

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Their style of business is outdated and going the way of the dinosaur. Waiting for clients at the airport is inefficient if business is limited; people do not trust the taxi sign on top of the car anymore – and knowing a local cabby’s number in case of need is now outdated

The economics of Uber as discussed with numerous Uber drivers tell another story. The average driver makes between Sh6,000 to Sh8000 per day.

Break this down as follows; Uber keeps 25 per cent - Sh2,000, driver Sh2,000, car owner gets Sh2,000 per day and the balance is for fuel. Drivers work an average of 10 hours per day, six days a week. Do the math and you will see the driver get a monthly salary of Sh46,000. Not a bad salary, but not great either. The car owner makes about Sh500,000 per year after insurance and maintenance, and since most Uber cars cost around Sh1 million, this translates into a 50 per cent return on investment. The owner breaks even in less than two years.

There is a darker side to this economics. Most drivers do not own the cars.

They work as “free agents” with no insurance, no security of service and no contract, so the owner can fire you any day. They have no medical cover, end of service benefits or pension.

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Minimum wages

The long hours lead to tired, potentially dangerous drivers that in the long run are not in the best of professions. I would like to find a way to help the drivers own cars to create true entrepreneurs.

Boda boda economics are even worse. Average daily earnings are between Sh700 and Sh1,000. Up to Sh300 is given to the owner and Sh300 the driver. The rest buys fuel.

Riders' monthly earnings are between Sh9,000 and Sh12,000. This is barely above minimum wages and forced subsistence level living.

They are indentured slaves. To make these numbers, they have to work long hours, leading to more accidents.

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We need to help them own bikes. Perhaps this would make them better riders protecting their investment – and our safety.

The reality is change has come and will reshape our lives. A book called “Autonomy – The Quest to Build the Driver-less Car – and How It Will Reshape Our World” by Lawrence Burns, points out some interesting truths.

He notes: "Soon many of us will no longer need to own or drive a car. Instead we will rely on services that safely and conveniently use autonomous vehicles to take us where we want to go".

The hassles of car ownership will be eliminated – no longer will we need to shop for, finance and insure a car, or spend our time driving, parking or pumping gas. Why? For most people their car is one of their biggest investments yet it sits in a garage or parking lot 95 per cent of the time.

At least 90 per cent of fuel is lost in traffic and carrying a car weight that is too much for our needs.

The car is designed to carry five to seven people and 90 per cent of the time it carries between one and two people. Morgan Stanley, analyst John Jonas calls the car “the world’s most underutilised asset” and the Pulitzer Prize journalist says “in almost every way imaginable the car, as it is deployed and used today, is insane”.

I bet my grandfather would have been an Uber driver had he been around.

Mr Shahbal is Chairman of Gulf Group of Companies

UberUber-economicsUbernomicsPublic TransportMatatuSuleiman ShahbalTaxi