Uber model will bring further regulation to Kenyan taxis

February 25, 2016
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, Uber app

Uber, a new app to enter the African market, has received a swift uptake within months of its launch locally. The taxi service app flipped the script and has experienced rejection from taxi associations in the Kenyan capital, Nairobi in the recent past.

The root of the problem may lie in the business strategy and structure the app provides the local industry that was previously a free for all environment. In Nairobi, as in many African cities, the taxi fare and pick up points are determined by the taxi associations.

The associations that operate much like cartels monopolize the service provided, with local fares fluctuating indiscriminately. Determinants of fare that translate across borders are the distance from pick-up to drop-off point. A regular customer is also more likely to get a discount promising their repeat business to get a better deal.

Taxi services are organized in associations like the Kenya Taxi Cab Association. Tracking their revenue and consequentially their contribution to the national tax has been difficult to calculate. The open, structure-free system has loopholes that a formal system could correct.

Enter Uber. The revolutionary app put the power in the hands of the consumer. As with most American companies, the customer is king. The mobile application gives the consumer the ability to rate and review taxi drivers, determine which taxi to take and even the pick-up location.

Although the service was completely cashless in other nations, localization of the app included payment via cash. The ability of taxis to be ubiquitous, everywhere and anywhere, keeps them accessible and flexible to take on clients no matter their location.

As with much technological advancement, resistance comes with change. Mpesa and the internet were once thought to be passing fads and have later changed industries. Uber’s disruptive strategy strayed from the normal operations in the local taxi industry. However, its benefits cannot be slighted. The app organizes the industry while creating a registry of taxi operators complete with their personal details and revenue earnings.

For the consumer, the app is the gift that keeps on giving. The apps features include details on the car’s capacity, minimum fare charge and a fare estimate based on the drop off point. The biggest win with the app is the estimated time of pickup that finally eliminates the idea of taxi drivers who misinform customers on their location. Offering more value for money, convenience and efficiency the app is a better way to do business in the industry.

Business Prognosis:

Whether the taxi service app should exit the market is a sticky debate but its consequences are far reaching. Kenya’s free market economy is a conducive environment for the app to thrive. However, when it comes to localizing the app to the Kenyan market, the issue can be dealt in a confrontational way or strategically.

Deal with the local taxi organization or the app. Under the current laissez-faire model, the taxi associations are unregulated with the government unable to protect the consumers. Uber has stepped in to shape an unstructured industry into a formal operation.

By Cyrus Kamau

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