Uber’s quail moment as going gets tough for taxi drivers

A few weeks ago, an Uber driver cancelled a ride I had requested because, he said, his colleagues were rioting at my destination, the City Centre, and they will harass him. I wondered how merciless some Uber drivers were that they could hound their peers at such crazy hours. It was 3am.

I made another request, and the second driver was also not so enthusiastic because he was “not near” my pick up point, but after some hesitation, he agreed to pick me.

“Don’t think I did not want to take you to town,” he mumbled. “To say the truth, Sh450 to the City Centre is too little.

“You see, the idea they had on charging low fares was based on the premise that when I drop you, I get another customer, and I would get another customer where I drop off the second customer...”

Taxi kingdom

Such a system, he said, works well in developed countries where many people use taxis.

When Uber launched in Kenya in 2015, no driver could whine thus because they were having a field day, taking up all the customers in town.

When traditional taxi drivers complained, and said Uber drivers were being favoured because they were not even paying parking fees, Uber drivers laughed them out of town, saying they are always on the move, picking up and dropping off passengers and do not need to park and pay.

Uber was the rage, and app-based taxis such as Mondo Ride and Easy Taxi were feeling the heat. Uber was offering value for money; their cars were cleaner and comfortable and drivers pleasant. While Mondo Ride stayed on the road, Easy Taxi stalled, and quit -- and Uber drivers got decent returns.

Life was good, and when traditional taxi drivers tried protesting, and even got violent, the public opinion favoured Uber -- not even the bloodiest battles could defeat an innovative idea that had won over majority of Nairobians for its affordability and convenience.

Uber won. And, except for a few threats from Little Ride, Uber ruled the taxi kingdom.

But things are not looking rosy anymore for the drivers who had signed up in droves.

Customers are not increasing and they have to make do with the few who still prefer them in Nairobi and Mombasa. It seems Uber has reached its quail moment. There are just too many sellers (drivers) for a few buyers (passengers). Many Kenyans who saw it as a business opportunity, rushed and took loans to buy vehicles.

From around 1,000 Uber drivers in 2015, they increased by 300 per cent to over 4,000 drivers as of 2017. When Little Ride entered the market, the price war started, and Uber cut its prices by 35 per cent, and the drivers were not so pleased.

“I have no problem with lowering the price, my problem is there are so many of us on the road. We are not getting as many requests as before,” an Uber driver who did not wish to be named, said.

Then there is the rising cost of fuel. In 2015, Kenya was enjoying the benefits of the global oil glut, and fuel prices were low, but when fuel prices started rising, returns for Uber drivers started dwindling.

“It seems despite all our admiration for Uber, it was under the laws of economics, supply and demand. But we also should not forget that other apps came up to fight Uber,” says Dr XN Iraki, a lecturer at the University of Nairobi.

The situation forced Uber drivers to park their vehicles and ask Parliament to help them out, because, they said, Uber Kenya’s decision to slash prices had seen some of them default on their loan repayments because they could not break even.

In July last year, Uber Kenya announced that it had stopped accepting more drivers so as to ensure that the supply and demand dynamics were stable. Upon realising that most drivers did not own the vehicles and were remaining with very little money after Uber and the owners of the vehicles had taken their cut, Uber Kenya partnered with Sidian Bank in an initiative aimed at giving drivers loans so they could buy and own vehicles.

“And actually, that (drivers owning cars) is where we are moving towards. We are creating a lot of opportunities for the drivers to be car owners,” Uber Kenya spokesperson Jay Kemboi said, noting that it will take time but they want the drivers to be independent contractors.

Another financing arrangement with online loan app Branch was supposed to enable high-performing drivers, those who got better ratings from clients, to receive credit to pay for other car expenses such as insurance. This, together with the car loan from Sidian, was supposed to enable drivers to fully own their businesses.

Since the margin left by Uber was so small to be shared by the driver and the owner, some drivers worked for as long as 15 hours, a situation that saw some of them cause accidents because of fatigue. “Add the government regulations and we got a good mix of trouble. The resignation of Uber top brass shows all is not well,” Iraki says.

But Uber’s problems have not been restricted to the Kenyan roads alone. Its head office in San Francisco has been getting emptier. The company witnessed an exodus of its executives, the latest being its president Jeff Jones. He left after a six-month stint and cited divergent leadership values at the company. The company is also grappling with sexual scandals, among other issues. The New York Times reported that also expected to leave is Brian McClendon, vice president of maps and business platform. Uber has been thrown in an internal turmoil and the company’s chief, Travis Kalanick, admitted to needing leadership help after he was caught in a video engaging in a heated argument with a driver.

In the first half of 2016, Uber reported losses of $1.27 billion (Sh127 billion) forcing some quarters to question the narrative of the “burgeoning sharing economy.” Depressed revenues for Uber drivers or partners has seen drivers live in slavish conditions. This made some Kenyan lawmakers describe Uber as a pyramid scheme.

According to the MPs, for every Sh300 trip that a driver completed, Uber gobbled up Sh75 leaving the driver with Sh225 to cater for all the other expenses including loan repayments and insurance.

Uber Kenya denies that they are a pyramid scheme. “I don’t agree with that. Because it is not really about you bringing people and then keeping people under you,” said Ms Kemboi.

Even as Ms Kemboi denies the pyramid scheme charge, Uber Kenya is being investigated by legislators for tax evasion.

Akin to a glut

Its competitors, mainly Little Ride, believes this is the best time to pounce. It has aggressively marketed itself, including by advertising in the English Premier League, as it looks to build its brand beyond the Kenya’s borders.

Whether Uber — and its competitors — will survive on the bumpy Kenyan roads, only time will tell. Ronald Mahondo, the General Manager of Little Ride, says that even though there is something akin to a glut, the market will ultimately correct itself.

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