Roundup: Uber faces rough time in Kenya after brief success

Since its launch in Kenyan capital Nairobi in 2015, U.S. taxi-hailing firm Uber has caused excitement and anxiety in equal measure.

Those excited were consumers who saw the firm as godsend as it was offering lower charges than what was in the market.

Besides, the idea of just dialing a button on one's smartphone to call a cab was novel in a country where smartphones rule the roost.

On the other hand, those who were anxious were the traditional taxi drivers, many who relied on loyal customers who they were charging for as much as 10 U.S. dollars for a kilometer journey. To them, Uber was going to cannibalize their business.

And as expected, the taxi-hailing app disrupted the market in Kenya as it swept off the feet of excited consumers, many of whom were eager to use it to save money and remain trendy.

In the process, Uber recruited hundreds of drivers in its fold to serve the rising numbers of customers as rivals, including Taxify and Little Cab apps, emerged.

John Musomi is among drivers in Nairobi who joined the Uber bandwagon as it took the industry by storm.

"I joined Uber sometime in November 2015 after working as an independent driver for three years. For me, it was a great opportunity because business had gone down and I could no longer rely on loyal customers," he told Xinhua Friday.

To ferry someone from the central business district in Nairobi to Westlands some 5km away, Musomi would initially charge up to 8 dollars. But with Uber, his calculation would come to about 5 dollars.

Musomi however said things were good because he would get alerts on the next customer to pick as soon as he dropped someone, meaning he could do more trips.

The game-changer, for Uber and its taxi drivers, however came in July 2016 when the firm cut its prices by 35 percent following a price war with competitors.

In the new scheme, customers were to pay a dollar (base fare) plus 0.35 dollars cost per kilometer, plus 0.03 dollars cost per minute. The minimum charge was then dropped to 2 dollars while the cancellation fee stayed at 2 dollars.

According to Uber, the fare cuts doubled its Nairobi passenger numbers by between 70 and 100 percent.

"Based on our results, our driver partners have had a 100 per cent increase in new rides per week, this means that the price cut has doubled the amount of new riders for driver-partners," said Uber in a statement in November last year, adding they continued to have 100,000 unique people opening their app every single month.

But as Uber celebrated, the drivers started to grumble noting the firm was engaging in restrictive trade practices by capping the fares at 0.35 dollars per kilometer with a minimum fee of 2 dollars.

In July last year, as soon as they cut fare, more than 800 drivers through the Digital Taxi Association of Kenya filed a court case in which Uber was sued for engaging in bad trade practices. The drivers claimed that the move was an attempt by the company to create a monopoly in the taxi industry.

The matter boiled over late February when the Uber drivers went on strike demanding for higher rates. The drivers further accused the firm of keeping 25 per cent of what they make leaving them with so little.

Their plight was worsened by rising cost of fuel, which reduced their income by up to 20 percent. A liter of diesel currently goes at 0.90 dollar while petrol at 1 dollar.

"The maximum I can be paid for a kilometer journey following the revised rates is 4 dollars. Uber takes 25 percent of the money, which is about a dollar. Then I have to pay for fuel, pay myself, the owner and maintain the car. What one ends up with a day is so little the reason why we are on strike," said Simon Karima, an Uber driver.

He told Xinhua that the charges are exploitative and no longer untenable and that they would not back down until they are increased.

"The problem is that a driver normally does not know what is the charge until they reach the destination. So you may drive for three kilometers and the app tells you the charge is 6 dollars, which is so little that one wishes if they knew before, they would cancel the journey," said Karima.

The drivers, according to Karima, also want Uber to start charging immediately upon request for taxi, not when the client gets into the car.

"We also want Uber to reduce its percentage. Getting 25 percent for each journey is exploitative," Karima said.

Early this week, the government, through the transport ministry, has called on Uber to audit its pricing mechanisms to address any challenges posed by operating in a fluid environment where economic drivers change often.

Transport Principal Secretary Irungu Nyakera said the ministry has recommended a raft of measures to Uber, the drivers and the owners to facilitate a return to normalcy within the shortest time possible.

Uber officials in Nairobi have remained mum as the stalemate enters a second week. Endit