In East Africa, Uber and its rivals are fighting over drivers rather than passengers

by Abdi Latif Dahir

Last month, the Estonian ridesharing platform Taxify, revealed it was launching in the Ugandan capital city, Kampala. What’s interesting about the company’s launch there is that it’s equally focused on marketing the promise of lower prices for riders as it is on taking lower commission fees from drivers: 15% instead of the 25% competitors take.

Taxify’s expansion across East Africa is the latest sign of how ridesharing apps are promising to contribute to “healthy competition” by improving both quality and customer service but also to allow drivers to make a sustainable income. Given that most large sub-Saharan African cities are overwhelmed by unemployment and difficult economic environments, the debate over driver wages has become a contentious issue. So while slashing fares for customers has been welcomed, the reduction of revenue for drivers with high commission fees has led to violent protests and strikes. The trend towards both cheaper rides and lower commission fees for drivers also shows how competition is working with ridesharing apps in East African cities. The top companies are battling to outflank each other and attract more customers— but also drivers.

Ever since Uber launched in Kenya in 2015, and then expanded to Uganda and Tanzania in 2016, various competitors have entered the market or have been established locally to take on the controversial but deep-pocketed US behemoth. These include Taxify, Little, and Dubai-based Mondo Ride. Together, they have tussled over fare rates, tweaked and innovated around their product to respond to local challenges, and pegged their success on expanding into more cities and countries and hiring more drivers to boost their numbers.

When Little was established last year by Kenya’s largest mobile operator Safaricom, it was resolute in offering cheaper and more localized solutions. Developed by the Kenyan tech firm Craft Silicon, the ride-hailing app offered customers free Wi-Fi, cheaper fares, and promised to give drivers a higher share of revenues. Not to be out-done, Uber launched its premium service UberSELECT last month, allowing users to opt for a slightly more expensive trip with a higher-rated driver with a newer car. And to lure more drivers, Uber relaxed its rules to accept older cars—important in markets where drivers with newer cars are a rarity, and even partnered with Stanbic Bank in Kenya to get highly-rated drivers loans of up to 100% to finance their vehicles.

Yet, even after all the fancy add-ons and features, the biggest opportunity and challenge in the market is still about the pricing. Uber, Taxify, Little and others have all cut their rates to attract more riders. The problem with this strategy is that it has proved fickle every time a new entrant comes into the market—and now at least one company is allowing customers to bargain prices, as you would with traditional taxis in African cities.

These price cuts have also been met with fierce resistance in the industry, both from ride-sharing drivers and their rivals at local taxis, who are incensed that the apps are distorting market prices. Then there are services like SafeBoda in Uganda and Maramoja in Kenya who are trying to convince consumers boda boda motorcycles are the better option to wade through the nightmarish city traffic. Ultimately, these challenges are not uniquely East African. Uber, already in eight African countries, sees some of these problems elsewhere as does Taxify, which is in four countries. Little is currently fundraising and hopes to raise enough money to establish its presence in 8 to 10 countries by 2018. But as these rival firms compete for driver attention and approval, probably only one winner will ultimately emerge: the consumer.

Posted by on Nov 17 2017. Filed under Business. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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