Will permanent fee caps rein in Uber, Bolt, Little?
Caps on digital taxi commissions in Kenya follow similar actions by India and China.
Kenya has imposed a permanent cap on the 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 percent cap will also apply to the commission paid by the owners of the vehicles registered to the various digital taxi companies.
“The commission which shall be paid by a transport network driver or owner to the transport network company, which shall not exceed eighteen percent of the total earnings of the trip,” the new rules published by Transport and Infrastructure Cabinet Secretary James Macharia read.
“A transport network agreement shall not include terms or conditions designed to increase the commission payable by a transport network driver or owner such that it exceeds eighteen percent of the total earnings per trip as required under sub-regulation (2) (g)” the new regulations further said.
And is what is likely to further shake-up the industry, Mr Macharia said the ministry would also evaluate the fares structure to ensure appropriate earnings for drivers.
“The ministry is currently in the process of engaging a consultant to evaluate the market as it is currently structures, explore the taxi and transport network company fare pricing mechanism available, undertake a comprehensive review of the transport network company rules 2022 and prepare a sustainable taxi and transport network company pricing policy” he told Smart Business.
Taxi commissions
The caps on digital taxi commissions in Kenya follow similar actions elsewhere in India and China.
The Transport ministry in China said in February this 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.
India in 2020 also published guidelines allowing app-based taxi aggregators such as Uber Technologies and Ola to charge a maximum 20 percent commission on ride fares. India also put a cap on the so-called surge pricing-- the fare Uber and Ola charge during hours when their services see peak demands.
Further, the rules in India hold that a ride-hailing firm can charge a maximum of 1.5 times of the base fare but can, however, choose to offer their services at half of the base fare as well. The rules also state that digital taxi operators provide their drivers with insurance cover and the drivers should not work for more than 12 hours in a day.
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.
Complaints about exorbitant commissions — as high as 25 percent in some instances — were not uncommon before the pandemic began, but they reached a high point last year as many drivers were forced to scale back on their operations on reduced business and the fast-rising cost of petroleum that even forced the State to roll out a fuel subsidy in April 2021 to appease restless consumers.
Dozens of vehicles, especially the Suzuki Alto model that is popular with Uber Chap Chap operators, were put under the auctioneer’s hammer for loan defaults.
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.
Bolt, formerly Taxify, had previously increased the partner commission fee from 15 percent to 20 percent in September 2019 while Little’s corporate service also increased the charges to 19 percent in 2020 citing growing operating costs.
With these high commissions and costly fuel what followed were frequent strikes by drivers, who decried their fees as extortionate and exposed their trade to annihilation. The aggrieved drivers, particularly those servicing commercial loans for their vehicles, 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.
Lower fare rates
For example, drivers protested a decision by Uber to lower fare rates to Sh25 per kilometre from the initial Sh60 per kilometre---directly affecting their income.
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.
The State action drew public praise with many critics accusing the digital taxi-hailing firms of exploitation.
“This is a deserving exception to the general rule in economics against price control. Due to the monopolistic behaviour of the digital transport platform owners,” Charles Kanjama, a Nairobi-based Advocate of the High Court of Kenya said in a reaction to the commission caps.
The caps are expected to give drivers and car owners a pie of the cake as they battle to stay afloat in a turbulent market scorched by high inflationary pressure.
“The caps on the commissions are a good thing but not enough. The taxi-hailing firms should also review the fares to make sense of the prevailing tough economic times,” John Mwangi, a digital taxi driver, told Smart Business.
Perhaps spooked by the public concern about the welfare of its drivers, Uber Kenya announced it has increased passenger fares to appease its registered drivers ruffled by recent sharp increases in the price of fuel.
“Our commitment to drivers is to continuously find ways of maximising their earning potential while meeting the needs of the riders. As part of our regular engagements with drivers, we increased fares to help drivers with the recent spike in operating costs,” the company stated but declined to disclose the new rates when asked by the Daily Nation.
Drivers, however, revealed that Uber raised the minimum fare to Sh160 from Sh150 effective July 5 for the Uber ChapChap option, the low-priced and almost default service for most Kenyans. The base fare — the price charged before the start of the trip — was increased by Sh8 to 108. The rate charged per kilometre was also raised to Sh26 from Sh25.
The company said it was monitoring the situation, especially in the global market, and would effect changes based on riders' and drivers’ feedback.
“We continuously engage directly with drivers using our various engagement channels to work towards addressing any issues,” said the company.
Uber made the move even as its rival, Bolt, was reported to be in talks considering a similar move.
