Earlier in April, when Tanzania’s Land Transport Regulatory Authority (LATRA) introduced a mandatory 15% for all ride-hailing companies in the country, Uber hardly protested. The global ride-hailing giant quietly left the country. Their last words? “We will only return if the regulation is addressed.”
Kenya’s National Transport and Safety Authority (NTSA) is now replaying the Tanzania script with a regulation that enforces an 18% commission cap for all ride-hailing companies in the country. This time, Uber is not quiet, neither is it leaving without a fight. With four days to the enforcement of the law across Kenya, Uber is fighting for the regulation to be revoked as unconstitutional.
Uber, which charges a 25% commission on its trips, maintains that such regulatory moves are innovation-stifling and harmful to Kenya’s economy. The company explained that its pricing system covers promotional price cuts to attract riders, general operational costs, health insurance on the trip for all users, and support of safety technology for passengers and drivers. Cutting down its commission by 7% will, therefore, limit its ability to operate optimally and productively in the country.
“Service fees/commission regulation, which is equivalent to price regulations, would be undesirable because there are no product features or market failures that would warrant capping of the service fees,” Uber said in its High Court application.
Meanwhile, Kenyan ride-hailing company, Little, is seizing the opportunity to announce itself. The local company, which offers drivers a 15% commission on trips, believes that the regulation will open a fair-playing ground for all ride-hailing firms in Kenya.
Speaking to Business Daily, Little’s CEO, Kamal Budhabhatti, said that the cap on commissions will hinder its competitors from offering perks like reduced costs and recurrent discounts, which it cannot provide to its customers because of its lower 15% commission.
“We are okay with that regulation because it is already what we are charging. We support the commission and what the government is trying to do. The higher commission is what they (rival firms) use to keep prices down and eventually putting down the expenses on to drivers,” Budhabhatti asserted.
Bolt, another mega player in the Kenyan ride-hailing space, is yet to say anything on the matter. At its standard 20% commission rate, the Estonian-born company stands to lose no more than 2% should the legislation become law. Perhaps, this reduction is not so much for the company to activate a strong litigious process, or it is waiting for Uber to achieve a win-for-all victory.
A fresh perspective on Uber’s struggle becomes apparent when you consider that the American mobility company gracefully exited Tanzania, a country with over 22 million urban population, but is struggling to operate within Kenya’s 15 million urban population, an obviously smaller market.
Some have attributed Uber’s decision to the future they see in Kenya, a country that is fast racing to be the digital epicentre of Africa. Again, Kenya’s currency is 19.35 times stronger than Tanzania’s shillings, meaning that Uber’s profitability in Kenya greatly surpasses Tanzania, despite the latter being a bigger market.
September 18th, 2022, is when NTSA’s regulation is expected to take effect in Kenya. Will Uber be forced out of yet another African country? TechCabal will be on the lookout for updates.
On Friday, the 23rd of September, TechCabal, in partnership with Moniepoint (by TeamApt), will host the most important players in tech and business on and off the continent to discuss the future of commerce in Africa. Register now to attend.”
