Cab firm Yego stirs ripples in Kenya's digital taxi market
Singapore-based ride-hailing firm Yego is gradually ruffling feathers within Kenya’s digital taxis ecosystem, just four months after entering the market.
Singapore-based ride-hailing firm Yego is gradually ruffling feathers within Kenya’s digital taxis ecosystem, just four months after entering the market.
In addition to the low commissions charged on drivers since entering the market at the end of October, the operator last week signed a deal with drivers that could embolden the chauffeurs to dissent against leading ride-hailing providers Uber, Bolt, and Little.
Key in a Memorandum of Understanding signed between Yego and four associations of digital taxi drivers was a review of pricing—a thorny issue that has haunted Yego’s rivals here for years.
“The challenge that we have today is that every company charges an arbitrary price, which may or may not be scientifically calculated and may not have taken into account all the costs that drivers have. Our view is that to bring fairness and transparency into this entire industry, fares should be computed on a scientific basis, taking into account all the fixed and variable costs a driver incurs and a reasonable profit for them to feed their families and save for their future,” said Yego chief executive and founder Karan Vir Singh.
Mr Singh said they had agreed with associations representing about 20,000 active drivers in Nairobi and a total of 50,000 drivers countrywide, to procure services of computation of fares from an independent party. “An independent party is best placed to set fares that favour both driver and customer,” he told Smart Business.
Independent auditors
Digital Taxis Association Chairman David Muteru said drivers pushed for an independent body to compute fares in a bid to address challenges many have been grappling with.
“We have agreed to approach independent auditors to calculate prices so that App companies don’t set prices. We have agreed to approach the Automobile Association of Kenya as the independent party to calculate prices scientifically and then everybody will abide by that,” said Mr Muteru.
And in a move portraying Yego’s concession to demands by drivers, the company also committed not to deactivate their accounts without sufficient reasons, or their knowledge.
The firm says it is in talks with three lenders to have them access financing to purchase vehicles, in a deal that will see it act as the middleman who will vouch for them to financiers and collect repayments daily on behalf of lenders.
“We are in discussions with two of the big banks and another financial institution to be able to get financing for drivers at lower than the current interest rate and also to make it easy for them to access financing based upon the credit score we give them,” said Mr Singh.
This is in addition to linking drivers to medical covers and pension services and topping up their contribution to the National Social Security Fund (NSSF).
“We are engaging with the government to see if we can, somehow, bring this ‘unorganised’ sector under the coverage of NSSF. Since this is an informal sector, they are not our employees, but we want to bring them into getting something similar to NSSF. To be able to do that, there will be some contribution from the drivers and our part,” says Mr Singh, adding that exactly how that will be implemented is an issue still under talks.
Feeling emboldened, drivers say they will be knocking on the doors of other ride-hailing firms with similar demands, warning that they will not engage with any that fails to consider their plight.
They said the signing of a “working formula” with Yego is a first and will benefit them in many aspects.
“After this signing, we also hope to approach other (ride-hailing) companies where we will also sign agreements with them. We will work with those who agree and switch off those who don’t agree,” said Mr Muteru.
Digital taxi drivers have for long been at loggerheads with ride-hailing companies – which provide a platform linking them with customers – mainly on the rate of commissions the companies take.
Despite a State directive that they charge a maximum of 18 per cent commission, drivers still complain that some still go beyond 20 per cent.
But the entry of Yego last October brought a new disruption in the industry when it announced it would only take 12 per cent commission.
Kenya last year imposed a permanent cap on commission paid by drivers to digital taxi operators per trip, perhaps tracking after interventions by China and India, to protect thousands of workers long inconvenienced by high charges.
The Transport ministry said the 18 per cent cap will apply to the commission paid by owners of the vehicles registered to the various digital taxi companies.
The Transport Ministry in China said in February last year that ride-hailing firms and online trucking companies would have to set reasonable caps on their fees and make their pricing rules public. This push by China is in sync with President Xi Jinping’s “common prosperity” agenda which puts a priority on assisting small businesses and individual operators, such as ride-hailing drivers, to navigate the challenges of the still lurking Covid-19 pandemic.
Digital taxi
It is the first cap on the digital taxi commission fees in Kenya by the State, potentially signalling a lasting shift in the way that taxi apps charge drivers and car owners even as the industry emerges from the economic downturn.
Before the caps by the Transport ministry, Uber, Bolt, and Little platforms charged 25, 20, and 15 percent of the ride value or fare, respectively.
Today, Yego charges a 10.34 per cent commission, together with VAT, all totaling 12 per cent. On the other hand, after reducing its commission from 30 per cent to 18 per cent following new directives last year, Uber introduced an 11 per cent booking fee, that drivers now say the company cannot prove it is not charged on driver’s account. “Any trip an uber driver does is charged 29 per cent commission. There is no way for a driver to ascertain that the booking fee did not come from driver earnings,” Mr Muteru says. Drivers say Bolt charges them a 17.24 per cent commission, but adds a five per cent booking fee, totaling 22.5 per cent. Little cab charges only 18 per cent.
Previously, Bolt, formerly Taxify, had increased the partner commission fee from 15 per cent to 20 per cent in September 2019 while Little’s corporate service also increased fees to 19 per cent in 2020 citing growing operating costs.
With high commissions and costly fuel what followed were frequent strikes by drivers, who decried their fees as extortionist and exposed their trade to annihilation. The aggrieved drivers, particularly those servicing commercial loans for their cars, demanded a review of fares and commissions taken by the app companies, promising to switch off and delete the apps if they were not heard.
Concerned about the plight of the hundreds of workers, the State finally weighed in on the matter and set caps on the commissions as a way of safeguarding the take-home of the drivers.
