PSV reforms now target peer pressure to instil order

Investors in public service transport - matatus - have two months to organise into collective investment vehicles or be denied operating licences in a move aimed at restoring order in a sector notorious for breaching traffic regulations.

From January next year, the government will not license individual owners of saloon cars, vans and buses to run commuter services unless they are members of a limited company or a co-operative.

The move represents the first major change of tack by the government in favour of self regulation after seeing the traffic police department hopelessly exposed in enforcing order on the roads, partly because of capacity constraints and partly because of corruption.

Notorious

“Public transport operators who currently operate as individual owners have up to 31st December 2010 to come together and form either Saccos or companies and submit them to the Transport Licensing Board (TLB),” the ministry of Transport said in a notice.

Speaking at a road safety stakeholders round table, Transport Minister Amos Kimunya said the move would help the government stem the menace of errant operators and reduce road crashes.

“Motorists have notoriously devised ways to circumvent regulations on the use of seat belts, installation of speed governors, and overloading. It will be the responsibility of Saccos to ensure their members are compliant failure to which the ministry shall withdraw their operating license,” said Transport minister Mr Amos Kimunya.

This means that although the vehicles will continue being registered in the names of individuals, TLB licences - which allow them to ply a route - will be issued to a company or a co-operative which will then assign them to their members.

From an administrative point of view, the societies and companies will be held accountable for any breaches by its members, the same way the Association of Kenya Insurers is held responsible for any fake insurance policy certificates circulating in the market.

It will hence be the duty of the corporate entities to whip their members into line either through disciplinary action or expulsion depending on the bylaws.

The jury is still out whether this will effectively lock out or embolden the illegal gangs that levy informal taxes on the matatu sector.

The Matatu Owners Association said the initiative would encourage self regulation and pooling of resources.

“We shall be centrally employing drivers and conductors and this will bring discipline in the sector and tame rogue drivers,” said Mr Simon Kimutai, the MOA National Chairman.

He said this would inject professionalism and broaden the investment horizons for individual operators.

“Owners will be in a position to pursue other businesses instead of following the operations of a single matatu,” added Mr Kimutai.

Growing disorder in Kenya’s public transport system has over the years seen the industry’s operation costs rise steadily, squeezing the profit margins and discouraging new investments.

Re-organisation of the industry is expected to result in net earnings of 13 per cent for Matatu owners, a rate that would be competitive compared to average single digit returns from Treasury Bills and Bonds.

Kenya records 13,000 cases of road accidents annually, contributing to an average of 3,000 deaths and 13,000 injuries-- 6,000 of which are fatal.

Self-regulation in the public service vehicles hinged on peer policing and joint investment has for years been touted by operators as the best way of ensuring road safety compliance but was held by regulatory inertia.

PSV underwriting is one of hot zones for most insurers because of the high rate of claims that has forced the collapse of insurers like United Insurance, Access Insurance, Stallion Insurance, Lakestar Insurance and Standard Insurance.

The Matatu Owners Association recently bought and revived Invesco Insurance, the PSV underwriter which had collapsed because of failure to pay insurance claims, many of them believed to be fraudulent.

Several matatu Saccos already operate and own insurance brokerage and agency companies, with some operating their own petrol stations.

According to figures from the ministry of transport, there are 80,000 registered public service vehicles in the country.

60 per cent of the registered vehicles operate in Nairobi while 40 per cent in other urban and rural areas.

Two weeks ago, Mr Kimunya announced that 14-seater matatus will be gradually phased out from Nairobi’s central business district in favour of bigger capacity buses from January.

Technology is also being considered to support enforcement of laws in the transport sector.

“CCTV (closed circuit television) are already being installed in the city and we will be running some pilot scheme by end of the year on vehicle monitoring,” Mr Kimunya said.