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Economy

Pioneer transport Sacco drives ahead as investors assess new industry rules

Matatus everywhere: Players have taken a wait-and-see position as the regulators test the effect of pooling matatus under the umbrella of Saccos. Joseph Kanyi
Matatus everywhere: Players have taken a wait-and-see position as the regulators test the effect of pooling matatus under the umbrella of Saccos. Joseph Kanyi 

Stakeholders have taken a wait-and- see position on the campaign to bring sanity into the chaotic matatu industry by asking operators to trade under the savings and credit co-operative societies (Saccos).

But as they wait, one Sacco in Nyeri town is blazing the trail and demonstrating how self-regulation could transform the industry.

As one of the first matatu Saccos in Kenya, 2NK Transport Sacco was formed in 1993 from a loose association of a few matatu owners plying the Nyeri-Nairobi route.

In contrast to the cartel-like operations of other players at the time, the new Sacco, now governed by co-operatives laws, was able to quickly organise like-minded operators.

The society enabled operators to pool resources and to implement market-oriented strategies to serve customers well and increase earnings.

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This was at a time other operators in the industry had little regard for clients and harassment of travellers was the norm.

With new vehicles in good condition, well mannered drivers and orderly receipted payment modes, the Sacco soon made a good name with travellers.

Due to a well co-ordinated branding campaign, travellers identified with 2nk Sacco vehicles and it easily gained control of the Nyeri-Nairobi route. As other players remained ignorant of the new developments in the industry, 2NK was steadily growing into a strong force attracting more members and new partners while at the same time expanding into other routes.

According to the 2NK manager Anne Nyawira, the Sacco’s membership has risen to more than 400 operators with over 550 vehicles. “We have a workforce of more than 100 that include 51 permanent employees,” adds Ms Nyawira. Due to its strong financial base, the Sacco has offered loans to the tune of more than a quarter of a billion shillings to members. Other investments by the Sacco include two petrol stations, a petroleum tanker, and an insurance agency that serves its members and the public. It has also invested in buses.

To finance acquisition of the buses, the Sacco brought together a consortium comprising Equity Bank as the main financier, General Motors East Africa Ltd, Invesco insurance and Yana tyres.

But the Sacco’s most notable initiative that transformed the industry was setting up of a parcel delivery service. Being only a two-hour drive from Nairobi, the parcel delivery service took over most deliveries, which were formally made through courier service companies. Other operators soon saw the opportunity and started parcel delivery in other routes. According to the manager, the Sacco has invested in training of drivers and loading bay workers to maintain its strong reputation.

“These are the people who are directly dealing with our customers. We train them in customer care and safety. They have to be smart and to appeal to customers,” says Ms Nyawira.

She says that to maintain their fleet in good condition, the Sacco requires members’ vehicles to be refurbished regularly. The Sacco provides loans for the maintenance.

In 2006, 2NK started operating front office service activities (Fosa) where members deposit and withdraw funds.

The new regulations in the industry seek to replicate 2NK’s success in the whole sector and transform the industry through self-regulation.

Despite the tendency by matatu industry to resist change the sector is slowly embracing the new traffic rules.

Mr Joseph Muhoro, who has worked in the industry for more than 30 years, says that anarchy has for long dogged matatu operations with the greatest cost being the loss of lives in freak accidents.

But the Saccos are slowly forcing the operators to comply with road safety measures.

The new rules by the government require all vehicle owners to register with transport Saccos or form limited companies for the Transport Licensing Board to clear them to operate.

New regulations

The ministries of Co-operative Development, Transport, Office of the President and Local Government work together to enforce the new regulations.

“Before they are registered, they need to elect interim officials, show their operational area and also to get recommendation from the district Co-operatives officer,” says Patrick Kyugu the Nyeri Central district co-operatives officer.

Mr Muhoro, who is also the chairman of Nyeri based Nyesuma Sacco, says those who wish to join a transport Sacco must first prove ownership of the vehicles before they are registered.

Once a member, one is given a vehicle sticker that identifies their vehicle and is allowed to use the Sacco’s termini and save part of their income with the Sacco.

Such organisations enforce strict vehicle maintenance, cleanliness, discipline and check overloading.

“One can’t be allowed to carry excess passengers at the loading bay,” says Mr Joseph Macharia, an official with newly formed Nyeka Transport Sacco, which plies the Nyeri-Karatina route.

In most of the new Saccos, discipline of drivers and conductors is a must with all workers being required to observe strict work ethics and to have neat uniforms.

By-laws and fines

Penalties for errant member, drivers or workers outlined in most Sacco by-laws include one or two month suspension, expulsion from the Sacco or a fine of up to Sh10,000.

“Now we can discipline people by ejecting them from the Sacco or by fines using the by-laws,” says Mr Muhoro.

The new measures are bring to the industry a new level of competition, which involves market oriented values that have compelled other industries in the private sectors to improve products and services with focus on the clients.

“The image of our Sacco is very important and it is what we sell. We need to protect it so that customers will always associate us with good service,” says Mr Lawrence Gatama, the treasurer of Nyeka Sacco.

The savings and credit societies are also making it easy for members to remit even small amounts in contributions right at the loading bay.

Major investments

“Members have gained confidence in the Sacco and they save a lot since their money is collected right here at the bus stage. They don’t have to go all the way to the bank to deposit Sh500, it is collected right here,” says Mr Gatama. They can then receive loans against their savings in case of emergency needs like vehicle breakdown, noted Mr Gatama.

With their share capital growing on a monthly basis, the Saccos are now eyeing major investments to make use of the funds available and grow their savings.

Nyeka Sacco, for example, plans to invest in a bus and is also looking for space to start a car wash that will cater for members’ and public’s needs.

However, analysts see hurdles in implementing the new system, especially for short distance routes where vehicles make numerous stops making it difficult to supervise vehicle operation.

Another challenge may be that of corruption by some Government officials who are supposed to enforce the new regulations by taking action against errant operators.

Management issues that have dogged co-operative societies in other sectors may also crop up in the transport sector. These include mismanagement of Sacco funds, election of corrupt officials and poor management of the Sacco.

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