Uber facing myriad challenges in Kampala
Saturday October 22 2016
Less than five months after app-based taxi firm Uber launched in Kampala, it is facing challenges with its contracted drivers.
The drivers are reportedly leaving the service, switching off the Uber apps or not picking calls from corporate clients and those paying with a credit card. For the first four months after its launch, Uber was offering drivers incentives that saw them earn between Ush200,000 ($57.1) and Ush350,000 ($100) a week.
However, Uber faces stiff competition from local taxi service providers and boda bodas (motorcycles).
Enock Basajja Suubi, a cab driver who owns his car, said he quit Uber because he wasn’t making any money. Abubaker Isaac Matovu is still using the Uber app to get clients but he routinely rejects credit card clients.
He said without the incentives, the existing cost structure cannot work, especially if one has to pay the 25 per cent commission to Uber. By only taking cash customers he is able to avoid paying the 25 per cent that would otherwise be automatically deducted by Uber from a credit card transaction. He also adds that current Uber fees are too low and drivers are unable to cover longer distances without making losses, even for cash paying customers.
Uber drivers have to pay their for the fuel and maintenance costs, unlike other drivers like those that work with Friendship taxi, a company that launched a cab hailing service in July. These costs are covered by the taxi owner.
With increasing competition, drivers say that Uber’s incentive structure has been changing. In the first four months, Uber drivers were getting Ush15,000 (about $4) per hour, but this has since been scaled down to Ush10,000 ($2.9) and to Ush4,000 ($1.1) in incentives.
Uber currently charges Ush1,300 ($0.37) as the base fare, plus Ush900 ($0.26) for every kilometre travelled and Ush200 ($0.06) for every minute spent on the road. Once a customer pays, Uber deducts 25 per cent as its commission.
Mr Matovu said to take a customer to Ntinda, a Kampala suburb about six and a half kilometres away from the city centre, it would mean making a loss after paying Uber’s 25 per cent commission. He charges less than Ush9,000 ($2.6) to Ntinda if the client is from Uber, while in a Friendship taxi, it would cost Ush13,000 ($3.7). In a regular cab, it would be around Ush20,000 ($5.7).
The challenge of high costs versus low returns from Uber is worsened by the fact that taxi operators have to pay parking space, averaging about Ush20,000 ($5.7). They also have to pay between Ush42,000 ($12) and Ush52,000 ($14.8) in tax, to the Kampala Capital City Authority every month.
Nate Anderson, the general manager for Uber, said the taxi firm has considered the costs that are incurred by their drivers and found that everyone can comfortably make some money.
“When we did our research, we found that these taxis were underutilised, with drivers doing only two to three trips a day. These fares increase the number of customers and our drivers can increase their trips to between 10 and 15,” said Mr Anderson.
Friendship taxi drivers make more than $100 a week but the company’s 100 taxis are branded.
Mr Anderson said that while the profit margins on Uber fares are smaller, there are many more trips, which sees the drivers make more after totalling all their trips. In any case, he said Uber is applying the same rates in Dar es Salaam, Tanzania and in Nairobi, Kenya and these markets are functioning with no problem.
In Nairobi, Uber charges Ksh100 ($0.97) as the base fare, Ksh3 ($0.03) per minute and Ksh35 ($0.34) per kilometre. The drivers pay 25 per cent to Uber as commission. Driver partners staged protests in Nairobi in August, accusing the taxi hailing service of treating them like slaves.
READ: Kenyan cabbies want government to ban Uber within 7 days
The protests followed Uber’s decision to slash its rates by 35 per cent, following the launch of Little Cab, which offers similar services under the Safaricom platform.