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New NTSA regulations bad for digital taxi service

Tuesday March 03 2020
By JOHN WALUBENGO

The National Transport and Safety Authority (NTSA) recently published regulations to try and get the online taxi-hailing operators like Uber, Little Cab, SWVL and others under their regulatory ambit.

Essentially, NTSA is trying to formalise an industry that has faced disruption ever since Uber came into the country about six years ago and got a rough welcome when the analogue or traditional taxi owners literally burnt some of the Uber vehicles.

Eventually the traditional taxi operators were forced to accept the technology, leading to many other similar startups entering the space by replicating Uber’s successful business model.

Currently, there are no official figures but we probably have between fifty and one hundred digital taxi hailing operators in the country. They employ thousands of young Kenyans in this new so-called ‘gig’ or sharing economy industry.

Contrary to popular opinion, the sharing economy is not new and was first launched more than twenty years ago when Amazon first launched its e-Commerce site – then only selling books online.

Within a few years, Amazon with its millions of book titles, became the largest bookshop without owning any books or any physical book store. They simply owned the platform that connected the book owners to the book buyers.

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AirBnB, another platform company is currently the largest hotel in the world that does not own any rooms or handle any guests. They simply connect the room owners to their guests and charge a commission.

The digital taxi services business model is not any different.

Uber is currently the largest taxi company that does not own any car, does not employ the driver nor solicit for passengers. They simply connect these three actors over a digital platform and charge a commission.

The drivers are self-employed, they must sort out their driving hours, their car maintenance, their fuel and insurance costs, their customer care, etc.

Whereas the system has worked well so far, there has been serious pushback at a global level for the digital taxi operators to take more responsibilities in terms of how they engage and manage drivers, provide support for passengers, pay local taxes, etc.

This is perhaps the motivation behind the NTSA digital taxi service regulations.

The regulations provides for all digital taxi operators, their drivers and their vehicles to be registered with NTSA at some prescribed fees.

Additionally, the regulations try to ensure drivers are not overworked by setting a driving limit of 8hrs for each driver with a forced four-hour break in each 24-hour cycle.

There has been some pushback from local innovators who feel that the regulations are overbearing and may kill innovations. I however tend to think the regulations are timely and would streamline this subsector.

REGULATORY INTERVENTION

There is a rise in cases of robbery, theft and drivers that are overworked and underpaid. This trend may compromise safety standards and call for regulatory intervention.

There have been some arguments on social media has that some of the new digital taxi startups were blocked for plying routes that were previously not authorised or predetermined – in contravention to the existing transport regulations.

Obviously, such rules would have been counterproductive to the platform economy where routes are discovered and determined in real-time. So it was good to note that the new regulations do not actually prohibit dynamic route discoveries as alleged.

What is however suspect in the new regulations is clause 15, which states as follows:

15(1) No digital hailing service operator shall charge a commission of more than fifteen percent per trip.

(2) Digital hailing service operators are prohibited from levying or charging other charges, levies or fees over and above the commission.

This is an obvious attempt to dictate pricing for a privately owned enterprise and is likely to be very counterproductive.

Very few investors would want to enter a market or industry where some bureaucrat sits somewhere and decides how much one should pay their employees or charge their customers.

Furthermore, this would fly against the principles of an open, competitive market economy where actors are free to differentiate their services based on pricing, employee salaries, etc.

Clause 15 is therefore ill-advised and seems designed to scare off some players in the market and perhaps create room for others to enter or expand their market share.

If we can get rid of this clause 15, these regulations could be embraced and likely to streamline the subsector to the benefit of all the players - the passenger, the driver, the operators and the tax-collector.

Mr Walubengo is a lecturer at Multimedia University of Kenya, Faculty of Computing and IT.

Email: [email protected], Twitter: @Jwalu

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