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Opinion & Analysis

How Uber weathered local resistance storm

A mobile phone user looks at a logo of taxi-hailing app Uber on his smartphone in Shaoyang China.  PHOTO | AFP
A mobile phone user looks at a logo of taxi-hailing app Uber on his smartphone in Shaoyang China. PHOTO | AFP 

When Uber first launched in Nairobi on June 17, 2015, it was greeted with scepticism and bewilderment. Few, mainly techies, believed the online taxi hailing service could succeed in a city without street addresses. But as Uber started to change the local transport narrative, it hit a headwind of resistance to change. Uber has now weathered the storm and is poised to cause more disruptions in our chaotic transport system.

Its continued presence in Africa is creating new business models, making investments in the transport sector more rewarding, generating massive data that improves decision making and helps tax authorities collect more revenue from a sector that has largely remained informal.

Like the telecommunications sector, disruptions in the transport sector will yield new and more rewarding jobs. Already, the company has created economic opportunities for more than 6,000 drivers supporting more than 345,000 riders every month.

Through its partnership with Sidian Bank, it has provided loans valued at Sh10 billion ($100 million) to driver-partners. For vehicles valued at between Sh1 million and Sh1.5 million, the partnership finances up to 100 per cent at a reasonable interest rate of eight per cent annually for 36 months.Through Big Data analytics, Uber and Branch use a rating mechanism that allows driver-partners with an Uber app rating of 4.6* and who have completed at least 500 trips become eligible to access Sh30,000 as a starter loan, payable within six months at a fee of Sh2,175, equivalent to 1.2 per cent monthly interest rate.

The starter loan goes towards operational costs such as National Transport and Safety Authority sticker, business permit, new mobile phone and data costs. Most of the loan recipients would never have had access to such loans through conventional banking industry.

The disruption doesn’t end there. The company has created a partnership support network to assist many of these emerging entrepreneurs. Driver-partners receive Sh3.50 off every litre of petrol every time they fuel their cars at Total petrol stations. They can also service their vehicles at any Auto Express outlet at a discounted rate. In addition, they can wash their cars at affordable rates of Sh100 for saloon cars and Sh250 for vans.

Owing to the fact that many drivers in the transport sector waste their resources and die poor, Uber has partnered with Old Mutual to create Old Mutual and Uber Money Management programme that aims to offer financial literacy classes.

The programme scales regionally with Uber driver-partners receiving free financial literacy from Old Mutual in South Africa, Nigeria, Ghana and Kenya. Uber’s continued innovation has brought about unintended benefits from competition. Some taxis in Kenya are now considering using “e-hail” apps to dispatch taxis in a more intelligent manner. Last year, Kenya Bus Service announced it would launch an e-hailing app for buses. Competition from Uber has encouraged better standards and new innovation by existing platforms. There is hope that our chaotic transport sector may be disrupted in a manner that will bring benefits to the consumer. It is perhaps why Uber is receiving support from competition authorities and governments around the world, most of them stating that Uber has introduced new services and choices for riders and that competition raises quality standards for riders.

To better improve services to consumers, regulatory bodies must be mandated to encourage innovation and competition without favour or affection. As such, many of the existing regulations must be reviewed to ensure the law does not inhibit competition.

E-hailing taxi services by nature gather enormous amounts of customer data. Yet there is no proper mechanism for data protection. However, Uber has a strong team of information security engineers, software developers, and data scientists that use both technical and legal means to secure the riders’ and drivers’ information.

Additionally, Uber’s first-of-its kind Transparency Report details the regulatory requests for data that Uber receives in addition to the law enforcement requests that traditional tech companies provide. Technology is reshaping the transportation sector and creating meaningful entrepreneurial opportunities.

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