How operators of digitally-hailed taxis are dodging high commissions

Nakuru digital taxis that were impounded by the county government on April 30, 2020. [Kipsang Joseph, Standard]

A growing number of digital-based taxi operators are now going hybrid as they battle choking commissions and high fuel prices that have depressed their earnings.

While these taxi operators do not want to fully operate their business as traditionally as it used to be by ditching the apps, they are also keen not to let go of the benefits that have revolutionised the public transport business.

As a result, these drivers are using various digital applications to get clients and price their services with a keen eye on how much commission will be deducted from their pay.

It is the reason why you might have been asked by your Uber, Bolt or Little driver to go offline or even reject a ride but they will still drive you to your destination.

You will also still pay them the full amount the digital app showed once you reach your destination.

In some cases, you may be requested to adjust the destination to a nearer place - because the cost is less hence less commission deducted - but they will drive you to your previously indicated location.

Or if you adjust your destination while in transit, they will ask you about the price and the driver will either tell you they cannot make it or ask you to undo it but still drive you.

Daniel Ngugi, an online taxi driver, notes that the decision is necessary due to the commissions demanded from them by the technology company providing the services.

Biggest headache

It has become a tradition for him to ask his clients how much the app says the ride is, particularly if the distance is long.

“This way, I do not have to charge them more. They just pay me what the fee showed on the app and I do not have to pay commission,” he says.

Such a case means the drivers are using the app just to hook on to customers.

Commissions are the biggest headache for drivers in the e-taxi business. They claim the percentages are not business friendly considering they own the vehicle and they also have to battle the recently ever-increasing cost of fuel.

The cost of a litre of petrol now averages Sh160 while diesel is Sh140. Most of the vehicles used in the taxi business saloons are hatchbacks which are petrol powered.

The commissions charged by the technology hosts range from 25 per cent (for Uber) to 15 to 20 per cent for Bolt. Such means that if the fare paid by a client is Sh100, Uber will take Sh25.

New regulations

The logic is if a distance costs Sh1,000 on the app, there is no need to pay a commission of Sh250, which is almost the price of two-litre of petrol – yet the vehicle will not burn all the two litre to get to your destination.

A month ago, the government published regulations to cap commissions at 18 per cent. While this may be a relief to online taxi drivers, with the rising cost of fuel, it is just a drop in the ocean.

This is after a push and pulls that saw digital taxi drivers threatening to quit and at times going offline as they pushed for better terms in the business.

The National Transport and Safety Authority (NTSA) in 2019 drafted regulations which proposed a commission of not more than 15 per cent.

The regulations required taxi-hailing companies to pay Sh500,000 for a digital hailing service operator licence that will be renewed annually for Sh300,000.

Digital ride-hailing companies do not really operate as transport companies but as technology entities where they are known to only provide the platform for the business.

But even with the dwindling fortunes in the digital taxi business, these drivers cannot fully go offline. This is because there are cost implications to this as well.

Festus Waswa, a taxi operator based in the Nairobi central business district, says while you get your full amount being offline, you may also miss some clients.

“Like now, I am just from Jomo Kenyatta International Airport (JKIA) to drop off a client. That was Sh1,500 clean money,” he says insisting on the fact that he did not pay any commission.

“However, I would have made more if I switched on my app from JKIA. I am sure I would have gotten a client for South C and make Sh400 or Sh800 more instead of just burning fuel back to town,” he added.

As Financial Standard learnt, being a traditional taxi driver in Nairobi is not as simple as getting your vehicle approved for Uber, Bolt or Little. The process is as opaque as getting into the matatu business.

First, you need a station. This is known in the street lingo as ‘shimo’ which translates to a place. However, shimo means a station or stage where the vehicles are parked as they wait for clients or just to mark your territory.

Business pioneers

These stations are not owned by the county passe as some of them are not official and have no amenities. They are owned by the pioneers of the business. It is for this reason that when you walk around the CBD, you will notice most traditional taxi drivers are old.

“Hapa ukiingia lazima utoe ya wazee (when you join this business you have to pay the old guys),” says Ronald Kimani, a traditional taxi driver. “That fee does not include what you pay to the city-county.”

The fee could be Sh20,000 or Sh30,000 depending on how you present yourself to the old folks. It is almost like pouring libation to the ancestors to recognise them for paving the way for your business.

This fee is a lifetime as Financial Standard learns. Kimani says he has never done a digital taxi business. He drives a Toyota 100. His vehicle, while it might have outlived Waswa’s first car, a Toyota Vitz, is not legible for the digital taxi business.

“Business is no longer the same with the digital taxi apps. Those things are for people like you,” Kimani says referring to the young generation. “But if you want to join a traditional taxi, I have to tell you it is not easy either.”

This trend of going back to traditional taxis is not only in Kenya but has also been witnessed in other markets where the digital transport business has thrived.

A February 2022 report shows the same is happening in Bangladesh, one of the world’s most populous countries.

This pricing challenge is what has allowed digital taxi service provider InDriver – which launched in the country in 2019 – to provide a chance for clients to bargain.

The ride-hailing taxi uses a similar model to Uber, Little and Bolt. When the client sets their price, it is up to nearby drivers to accept or decline.

By Wainaina Wambu Jan. 24, 2023
Financial Standard
Lobby: Policy gaps hinder Kenya's disaster management
By XN Iraki Jan. 24, 2023
Financial Standard
Premium Nairobi city's leading export will surprise the nation
By Macharia Kamau Jan. 24, 2023
Financial Standard
Premium How energy sector agencies reneged on deal to support low electricity cost
By Peter Theuri Jan. 24, 2023
Financial Standard
Kwach: Africa Data Centres provides rich ecosystem