The falling fuel prices should have brought fortunes for the public transport sector largely dominated by buses and 14-seater passenger vehicles, popularly known as matatus. That is if there was no lockdown, curfew or raft of restrictions that have come with the Covid-19 pandemic.
The sector, viewed as among the weakest link in the spread of the contagion that’s the coronavirus, has now been tightly controlled, driving it to the edge of the odds that have ravaged almost all businesses.
In Nairobi, which has been on lockdown for weeks now, hundreds of matatus have been parked on the outskirts of the city as the number of commuters have significantly dropped. The matatus are also restricted on their carrying capacity.
Matatu saccos that spoke to Smart Company said they have cut their fleet by over half and are struggling to get even enough passengers to meet the half capacity allowed by the government, apart from making fewer trips to the city centre as most commuters continue to stay away from town and work from home under the new measures to control Covid-19.
“Then we have to provide passengers with sanitisers and take the buses for spraying just as a precaution because the crew have to remain cautious just in case they get exposed,” said Edwins Mukabana, Kenya Bus Services Managing Director.
“It’s a delicate balance that is driving the already difficult business far from being profitable because we have to avoid anything that will put us at the centre of blame during this pandemic.”
The countrywide curfew means all the drivers have to plan how to drop the commuters by 7pm and then get to their houses before this time. This, too, has hit the city matatus hard as the evening commute peaks at 7pm on normal days — a moment for gold rush, as the operators usually hike fares and occasionally overload.
Despite the increased compliance costs and reduced business opportunity, the matatus have no leeway to increase fares for the few passengers they are allowed to carry as that will prove counterproductive in a situation where demand itself has been depressed. The government has also warned against overcharging.
This is a perfect catch-22 for a sector that has always had its way in controlling fares; it cannot do that now with the few vehicles it can put on the road even as it struggles to find the commuters. This grim situation arguably presents the toughest time for the matatu sector.
Yet the virus is not the only affliction eating away matatus’ earnings. Another big challenge is fuel. Diesel this month began retailing at Sh78 per litre in Nairobi and Sh75 in Mombasa, another city under lockdown. The stationary fleet in these towns means they are most likely staying idle with the more expensive March and April fuel in their tanks.
They’ve no chance to enjoy the cheaper fuel. But there is an even worse situation.
Some matatu saccos, and particularly long-distance buses, have a fuel purchase plan that has seen them come up with huge storage facilities to cushion them when fuel prices fluctuate. It’s not clear how much the city saccos had stocked, but it’s said to be in hundreds of thousands of litres.
It’s also not precisely predictable what level the fuel prices will be when normalcy resumes, but the global crude prices are no longer looking south, and that means the opportunity to buy a litre of fuel at almost half the cost of that of water will have passed.
“We were completely unprepared with fuel stock and I had even acquired a few new buses and serviced several others in preparation for the Easter high season when the (lockdown) announcement was made on April 6. We refunded some travellers who had booked and several costs are running whether we are on the road or not,” said a director of an upcountry bus company based at the Nairobi railway terminus said, asking not to be quoted, so as not to be seen as lamenting on government measures to contain the pandemic.
Several costs like insurance will definitely roll on as the buses stay idle and those that expire during the pandemic will have to be renewed much as they were unused for some time.
The costs are usually based on the vehicle’s carrying capacity, which has now been cut by half thanks to the coronavirus, while the costs have not changed.
A typical 51-seater bus pays Sh8,000 monthly for a seasonal ticket to the city authorities and another Sh720 per seat for insurance. The smallest ones, the 14-seaters, pay Sh3,600 to terminate at the city every month. None of these have changed and time is ticking towards the third month of bad business.
There is no system to tell which vehicle is operating and which one is not and saccos are forced to pay for the entire fleet or risk being kicked off the termini.
Then there is the cartel comprising the terminus crew and those popularly known as the squad, which comprises drivers and conductors unknown to the vehicle owners or the saccos. They take over the vehicles midway and drive them around as they fill.
them up with passengers at a fee. Although the number of matatus have been reduced, this group remains demanding their pound of flesh.
Along Ngong Road, such a gang assembled just after the Shade Hotel take turns to get into the buses in groups of three to replace the genuine drivers and conductors who alight about a kilometre before Ngong. The gang then takes control of the bus until they reach Karen on the way back to town. Although they hardly find passengers because of Covid-19 measures, the squad still gets paid.
This cartel, including organised criminal gangs, rogue traffic police officers, county askaris and touts are said to be bleeding the sector of some Sh47 billion annually. Those who refuse to cooperate with them are either pushed out of business or forced off lucrative routes.
In town, the county askaris are still there and the rogue traffic police officers continue to collect cash from the operators.
“We used to pay Sh200 every morning at the railway bus terminal, but now we pay Sh100 in the morning and then another Sh50 or 100 every trip. We also buy sanitiser”, which may cost Sh100 per trip. “The casual crew in the major stops and those that take over the bus before we get to Ngong are also paid something,” Mr Mogaka, who drives a matatu route 111, told Smart Company.
At the bus station, every trip is charged Sh200, an amount that matatus also part with at Kibera and Kawangware stops. Other stops along the way charge at least Sh20 for picking up and dropping off passengers. Bus owners have also to part with up to Sh30,000 to operate a new vehicle on a route and be allowed to pick passengers on certain bus termini.
All these add up to make matatu industry the only business where miscellaneous levies almost override the main costs.
It is startling that the sector, which is critical to the economy, has been allowed to degenerate into a cartel-controlled business under the watch of the authorities.
With the heavy revenue leakages in the sector, many investors have decided to stop operations due to the inability to meet running costs with the 51-seater buses, which usually have targets of Sh9,000 daily, now said to be making a paltry Sh3,000.
Stakeholders say proper regulation and removal of cash transactions from the system will be a big boost to the sector where investors sink up to Sh7 million to buy one bus.
“We can remove cash from the system completely and this Covid-19 should have been the time to do that and then all these gangs will have nothing to collect. Just like the National Youth Service is helping man the airport, they would do this sector a huge favour by managing the termini even if it means taking the same people in the termini for training for at least some formality and order,” Mr Mukabana said.
With more employers creating measures to allow remote operations, and rising Covid-19 cases now threatening to cause more cessation of movement in parts of the cities like it has been done at Nairobi’s Eastleigh and Mombasa old town, the sector that keeps the city on the move will struggle in the post pandemic recovery as it remains outside the radar in the offers being given to businesses to cope, thanks to its informal nature