Business

App taxis face tough times as costs soar

App taxis face tough times as costs soar

It is Monday morning. Most investors in the digital application taxi business are eagerly waiting for a notification on their mobile phones about weekly returns from their drivers.

Depending on the agreement between a driver and the owner of the car, most of the payments are done weekly, especially on Monday when the application providers (Uber, Taxify, Little etc) release payments done during the week through cards.

However, Monday, which was once a promising day for the car owners, is turning out to be a theatre of all drama.

It starts with unanswered calls, where car owners are ignored as they demand payments.

“If you are lucky to get something at the end of the day, it will be less than the amount agreed,” said Odhiambo George, a car owner operating a digital taxi.

“This is now normal in the industry despite continued negotiations with drivers.”

Jackson Mogaka, an app taxi driver, said before the Covid-19 pandemic, he used to pay the car owner Sh10,000 a week or Sh40,000 a month.

But the rate has now gone down by almost half to Sh6,000 on a good week. He said high fuel prices, commission charged by the app providers, discount on rides, and the current movement restrictions have greatly affected the industry.

The sector now depends on corporate clients and late-night revellers. Despite shrinking revenue, the cost of operations has been on an upward trajectory.

During the May-June fuel adjustment initiative, the Energy and Petroleum Regulatory Authority (Epra) attuned the super petrol price by Sh3.56 per litre, pushing the cost to Sh126.37 in Nairobi.

In the April-May period, the price of petrol was retained at Sh122.81 in Nairobi. Speaking to Shipping and Logistics, David Muteru, chairman Digital Taxi Association of Kenya, said the business was no longer profitable.

Many car owners who purchased their vehicles on loan have to let their assets go to auctioneers. “We have pushed for a better work environment through strikes but nothing is working. Laws are skewed against us,” he said. 

According to Joram Wanjiru, a taxi operator, the commission charged by app providers per ride continues to dilute income for both partners and drivers.

“The commission we pay to app providers does not balance with the increasing cost of operations,” he said.

Uber, Little, and Bolt are the current big names in the digital taxi business. Uber and Bolt charge a 25 and 20 per cent commission per ride respectively while Little levies 20 per cent.

The drivers are pushing for minimum commissions to be set at 15 per cent for the Nairobi market and 10 per cent for Nakuru and Mombasa markets.

Uber Head of East Africa Brian Njao said a lot is deducted from the 25 per cent commission charged, including value addition to the market to spur demand.

“It’s a fee we charge flat across board. If you think about it in terms of drop in demand and supply, it works differently from actually charging a fixed fee where when demand is low the fixed fee becomes expensive.”

In 2019, Nairobi Senator Johnson Sakaja argued that digital players like Uber and Bolt do not distribute the profits they earn to tax authorities or their drivers.

“The drivers have to work long hours with some taking home less than the average minimum wage,” Sakaja told Parliament.

“The amounts charged by these cabs are below minimum rates prescribed by the Automobile Association.”