Kenya’s online taxi operators warn that proposed regulations for minimum fares could shrink the country’s digital transport market by as much as 40 per cent.
Operators argue that the proposals, which include setting a Sh500 minimum fare for taxi trips, risk reversing years of growth in a sector they estimate contributes more than Sh50 billion annually to the economy and supports about 40,000 drivers and couriers in Nairobi alone.
A report by ride hailing platform Uber shows that such measures could erase roughly Sh20 billion in annual economic activity as passengers abandon short-distance rides because of higher costs.
Some of the players that the Star talked to who sought anonymity as they said they consider the matter ‘sensitive’ argue that forcing a Sh500 minimum fare would distort the market by encouraging drivers to favour only short trips.
“Higher fares do not necessarily translate into higher incomes for drivers. Instead, drivers earn more from completing many trips at competitive prices than a few expensive rides,” said one of the players.
The warning comes as the government considers changes to regulations governing digital taxi platforms amid sustained pressure from sections of drivers seeking higher earnings.
The Ministry of Transport and the National Transport and Safety Authority are still working on the proposed rules that aim to raise minimum trip compensation from around Sh220 to between Sh400 and Sh500 to protect drivers from high fuel and maintenance costs.
According to the company, a driver completing twelve Sh300 trips in a day would earn significantly more than one completing only two Sh500 trips, while still meeting fuel, insurance and vehicle financing costs.
Another leading platform in the country said that its database show that customers are price sensitive and avoid trips incase they feel the discounts are too little.
The platform firms also warned that reduced demand could trigger widespread loan defaults among drivers who purchased vehicles through financing arrangements.
“If drivers lose trips, many will be unable to meet their daily repayments, leading to repossessions and loss of livelihoods,” the firm said.
They argue that government’s approach to regulating the sector, should be policy based focusing on safety, quality standards and consumer protection rather than setting prices.
They further argued that Kenya already imposes one of the world’s lowest commission caps on ride-hailing platforms at 18 per cent, compared with 25 per cent in many other markets, limiting the companies’ ability to reinvest in discounts, incentives and new technologies.
The firms also expressed concern over annual licensing requirements for ride-hailing firms, arguing that one-year operating licenses discourage long-term investment in Kenya’s technology sector.
They warned that increasing regulatory restrictions could discourage innovation, including investment in electric vehicles and new mobility technologies, and make Kenya less attractive than competing markets for digital transport investment.
