Kenya’s Struggling Uber Drivers Fear a New Competitor: Uber

Traffic in downtown Nairobi, Kenya. Credit Adriane Ohanesian for The New York Times

NAIROBI, Kenya — James Njoroge, an Uber driver in Nairobi, earns barely $5 at the end of a grueling 10-hour workday ferrying customers through snarled traffic across the Kenyan capital. Now a new competitor is in town, threatening to undercut even these meager earnings.

That rival is none other than Mr. Njoroge’s own employer.

Uber in Kenya, already one of the company’s most affordable services in the world, charges customers in Nairobi, Kenya’s capital, a minimum fare of $2.90.

Uber is aiming to beat back competing services by pushing its prices even lower. In April, the San Francisco-based company announced it was introducing an even cheaper service at half that price, $1.45, by allowing its drivers to use much older, lower-quality cars.

Drivers say they’re bearing the brunt of the price cuts. In February, drivers went on strike to protest fare cuts that they said made it difficult for them to break even. The new pricing is much lower than that.

The prospect of losing what is already a threadbare living is making Mr. Njoroge, 29, nervous.

Jeremiah Kamu, 29, has been driving for Uber for the past two years.  Credit Adriane Ohanesian for The New York Times 

Uber has quickly expanded across parts of Africa, where it is seen by those signing up as drivers — or “partners” in the Uber lingo — as a rare job opportunity on a continent with stubbornly high levels of unemployment.

But the service has stirred debate over how low fares should go, and the company has faced a series of strikes from South Africa to Lagos. This month, drivers in Lagos, Nigeria’s biggest city, went on strike after fares were slashed by 40 percent.

Faced with fierce competition from other ride-hailing apps, Uber’s latest service in Kenya, critics say, would pit its own drivers against each other in a kind of cannibalistic race to the bottom, eroding what little they already earn.

“To live in Nairobi, it’s very hard,” Mr. Njoroge said recently in his home in Umoja, a dusty but vibrant neighborhood on the outskirts of Nairobi where, within a short space of time, a fight broke out, a minibus with “Rock Gospel” stenciled on its side unloaded passengers, a man hawked grilled meat and a fashionably dressed woman crossed paths with a strutting rooster.

“You have to hustle on all sides,” he said. “If we don’t have many clients,” he said, referring to competition from uberGO, “we’ll need to find new options for work.” Mr. Njoroge already has two other side hustles.

An Uber driver waited for passengers in the Westlands neighborhood of Nairobi.  Credit Adriane Ohanesian for The New York Times 

Uber insists that the new service would allow drivers to save on fuel and other expenses, ultimately making their jobs more profitable.

“Revenues might not be higher, but the costs will be lower, so ultimately profits will be higher,” Alon Lits, Uber’s general manager for sub-Saharan Africa, said in an interview. “We believe our economics make sense,” he said, but added that the company was in the process of getting feedback from drivers in order to “interrogate our assumptions before moving forward.”

In Nairobi, Uber and its competitors like Taxify, an Estonian company, and Little Cab, a company owned by Kenya’s mobile network giant Safaricom that offers free Wi-Fi in its cars, are aiming to capture clientele from a rising, but fragile, middle class that still values affordability, sometimes at the expense of quality of service or even vehicle safety. Competition is fierce even among apps for notoriously dangerous boda-bodas, or motorcycle taxis, which are a major cause of road accidents.

In February, a series of strikes by an informal union of Uber drivers forced the company to raise the minimum fare to $2.90 from about $2, and rates to 39 cents per kilometer, up from 33 cents. But many drivers say uberGO, which is 29 cents a kilometer, is a fresh attempt to bring down rates, given that many cost-conscious customers are likely to use the cheaper service. The company last month said it was even offering $30 — six times Mr. Njoroge’s net daily earnings — as an inducement to drivers to sign up to the new, cut-price service.

Mr. Njoroge and many other Uber drivers expressed anxiety not just about losing customers but also about failing to meet car loans — loans that Uber helped them secure in the first place and that require drivers to stay with the company until they’re paid off.

Boda-bodas in Nairobi’s Westlands area. The motorcycle taxis are considered a major cause of road accidents.  Credit Adriane Ohanesian for The New York Times 

Uber sponsors its drivers based on their earnings record with the company. Without Uber, drivers struggle to obtain auto loans, even for secondhand cars, because banks require borrowers to earn monthly salaries of 50,000 Kenyan shillings, or about $485. That is far above what most ordinary Kenyans, even those with diplomas and degrees, can hope to earn.

Once a driver pays off the loan, which typically takes about three years, the car is the driver’s to keep, although by that stage it will typically be 10 years old. At that point drivers can leave Uber and start their own businesses, although many drivers said they intended to stick with Uber. Free of car-loan payments, they would keep significantly more of what they earn.

Until the final loan installment is made, however, drivers are pretty much at the company’s mercy. If they have not logged on to Uber’s softwarefor a week or so, the company sends a warning. If they’re absent for an extended period of time, and Uber decommissions them, the bank could withdraw its loan.

Uber “gives with one hand and takes with the other,” said Samuel Gichia, another Uber driver, who nonetheless appreciated the freedom that Uber offered. “My car is my office,” he said, drumming his fingers on the steering wheel as he listened to reggae music. “When you no longer have a loan, that’s when Uber is going to be very sweet.”

A Nairobi bus conductor trying to attract passengers. Uber and its competitors are vying for customers from a rising but still fragile middle class that values affordability, sometimes over service.  Credit Adriane Ohanesian for The New York Times 

Uber drivers say they might make 6,000 Kenyan shillings, or $58, a day, which doesn’t seem that bad by Kenyan standards — until they lay out their laundry lists of loans and work-related expenses. From that $58, drivers typically have to pay $19 for the car loan, $19 on fuel and another $14.50 for Uber’s commission. Once insurance is paid, there’s very little left.

Take Mr. Njoroge, the eldest of six siblings — the other five are still in various stages of schooling — and a father of one.

Mr. Njoroge, who had a string of odd jobs after graduating from university in agricultural sciences, turned to Uber in 2015 when it began in Kenya. Uber, he thought, would give him more independence, the ability to support his wife and son, now 2 years old, and a chance to buy a secondhand car.

After settling his car payments and paying for fuel, he said, he has about $5 left by the end of the day. On Fridays and Saturdays, when he is busier picking up night revelers, he makes net earnings of about $10.

He supplements his income with commissions from selling electronic credit for M-Pesa, a money transfer service on mobile phones, and also working as an agent for a local bank.

Mr. Njoroge complains little. He looked wistful when asked about his dreams and ambitions, but remained silent.

Back on the road, he finally gave his response.

“Right now, I can’t tell,” he said, as his car inched its way across town. “Right now, it’s just surviving.”

Source: nytimeson