Draft rules could derail ride hailing, boda boda

A boda boda rider on a flooded section of Haile Selassie Avenue in Nairobi. PHOTO | DENNIS ONSONGO | NMG

What you need to know:

  • In 2008 the Kenyan government, through the then Finance minister, zero-rated duty of motorcycles below 250cc.
  • The leading assemblers of boda bodas have invested approximately $10 million in the country, and the industry sells about 125,000 motorcycles annually.

According to the Task Force on Motorcycle Transport Reforms which the government appointed on February 15, 2019, the public motorcycle transport business, commonly known as ‘boda boda’, emerged along the Kenya-Uganda border in the 1960s.

The motorcycles mainly were used to ferry contraband goods along the Kenya-Uganda border. Boda boda provides a variety of services, namely passenger transport, parcel delivery, errands and increasingly, in the rural areas, transportation of goods.

In 2008 the Kenyan government, through the then Finance minister, zero-rated duty of motorcycles below 250cc.

This policy led to a significant decrease in motorcycle prices, with the net effect of the explosion of motorcycles into the economy. The policy was the key that unlocked the sub-sector to scale exponentially and create jobs in the country.

Though accurate data is unavailable, the report indicates that the National Transport and Safety (NTSA), police, and boda boda rider associations estimated that the sub-sector employed about one million riders, earning between Sh500 and Sh5,000 with annual earnings estimated at Sh219 billion in 2018.

NTSA forecasts that these numbers have drastically increased to 1.7 million riders with an aggregate earning of Sh350 billion in 2021. From a macroeconomics perspective, the impact of this sub-sector is far more significant than annual earnings by riders.

For instance, the leading assemblers of boda bodas have invested approximately $10 million in the country, and the industry sells about 125,000 motorcycles annually, which translates to approximately 10,000 motorcycles being registered per month.

Indeed, NTSA recorded upwards of 13,000 motorcycle registrations monthly during the Covid-19 curfew containment measures. It is plausible that many Kenyans have recognised the boda boda sub-sector as essential transport and courier service provider of choice.

However, with all the positive externalities, the central contentions with the boda boda are manifested by a culture of lawlessness, and conventional and emerging crimes.

As a result, the crime trends involving motorcycles have increased exponentially. Further, injuries and fatalities associated with the sub-sector have increased over the last five years.

Like the ride-hailing sub-sector that has experienced similar exponential growth, the boda boda grew without an attendant counter policy framework regarding registration, regulation, monitoring and designation as public service vehicle (PSVs).

In contrast, ride-hailing services have formalised hitherto informal and scattered operations for both vehicles and boda bodas. The Bolt platform, for example, supports over 50,000 drivers to earn a livelihood, many of them earning two to three times prescribed minimum wages.

Furthermore, all ride-hailing drivers and boda riders are now bankable due to formalised payment systems. In addition, it is now possible for NTSA, banks, telcos, saccos, police and any other stakeholder to access data held by ride-hailing platforms subject to the provisions of Kenya’s Data Protection Act, 2019.

Indeed, one of the taskforce’s recommendations was for the government to facilitate a shift of the boda boda sub-sector from the current informal entities to the formal economy.

The benefits derived from formalisation would go a long way in addressing public safety risks in the sub-sector. Through this shift, boda boda owners and operators will see themselves switching from informal to formal employers and employees with responsibilities governed by laws.

It is my personal view that this is where a public-private partnership between NTSA and ride-hailing platforms would come in handy. On the one hand, ride-hailing companies have developed robust and stable marketplaces with a well-thought-out business model.

On the other hand, the government is struggling with formalising the boda boda sub-sector to efficiently and effectively manage it.

With cooperation, ride-hailing companies could onboard all the boda bodas on their platform, and by so doing, the sector automatically becomes formal.

However, for this nascent ride-hailing industry to grow and play the rightful role in the transportation sector, policymakers must be guided by a regulatory impact assessment (RIA).

Although largely progressive, the proposed Digital-Hailing Regulations, currently before Senate’s Standing Committee on ICT, have some provisions that could potentially hinder the growth of the ride-hailing industry. For instance, the introduction of a clause to cap commissions to 15 percent for ride-hailing companies.

This proposal is arbitrary and goes against the free market principles that Kenya is known for. Moreover, the proposal is unprecedented and not done anywhere else in the world.

To ensure policy objectives are achieved most effectively, policymakers must consider the costs and benefits (or impact) of proposed policies, bills and regulations.

The Statutory Instruments Act, 2013 requires regulatory authorities to prepare a regulatory impact statement for every statutory instrument (rule, order, regulation, form, by-law, resolution, etc.) that is likely to impose significant costs on the community. As per the Act’s schedule, the statement should include an analysis of the impact on the private sector.

The impact on the private sector should also include, among other things, the effects on competition conditions. Unfortunately, no RIA has been conducted as far as the draft ride-hailing regulations are concerned.

Mwangi is the Head of Public Policy & Regulation, E.A for Bolt

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