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How Promise of Hefty Returns Lured Thousands of Uber Drivers to Debt

When Uber first made its debut in Kenya in 2016, city dwellers were elated. Taxis were now more accessible, orderly, clean and affordable. Riders embraced the changes in the industry that previously decried rogue and expensive trips.

Your taxi driver now smelt fresh, greeted you with a smile and played your favourite music as he meandered through the Nairobi streets with utmost decorum.

Taxi drivers who had been in the Industry were not quite welcoming. As riders celebrated affordable prices, seasoned drivers decried reduced profits. Here was a new company, signing up new drivers with a whole list of demandst boot, and everyone wanted to sign up for it.

Read: Uber Chap Chap On Its Death Bed Months After Launch

To own your Taxi under Uber, drivers now had to own a large engine clean car, sedan-type with ample space. They also had to check off all statutory requirements before they could be signed.

For seasoned drivers with older cars, this shift presented a problem. How were they then to convince their customers to use their services? People with newer cars had an advantage and after a few teething problems in the industry,Uber carried the day.

The company signed up offline Taxi companies, Airports and Shopping Mall cabs

Read: Uber Launches Intercity Bus Hailing Service In Egypt

“It didn’t have to be a hard sell to drivers once the client numbers started going up,” Julie Zollmann, a doctoral candidate at Tufts University who has been studying finance, technology and livelihoods in Kenya since 2010, said to The Guardian.

“It solved a big problem for independent drivers who were only otherwise getting a few trips per day and, at that time, the rates were significantly higher than they are now,” she wrote.

Drivers like Harrison Munala earned enough to rent a car privately at Sh15,000 a week. After driving the car for a year, Harrison felt it was time to invest more in the business that was promising great returns.

Read also: Uber Launches Digital Wallet in African Countries

So he borrowed money from his sister to make a down payment on a Toyota Passo, and topped it up with a loan from one of the Microfinance companies in town.

Harrison had a solid plan. He would keep working for Uber as he paid off the loan and then expand his business, buy another car and and hire someone else to drive.

“I felt like I had made it in life.” he said.

Four years later, Harrison and his family are sheltering in a church after they were evicted from their home in Nairobi.

Read also: Uber Records Sh194 Billion Loss In The Last Quarter

“When you have a family to feed, kids to pay school fees for, rents to pay, a loan to pay and your work is too much and exploitative, what happens?” he said.

This is the untold story of many Uber drivers in the country.

Once the US based taxi hailing company had established itself in the Kenyan market, Uber slashed its prices, which trickles down to the driver’s income.

They also introduced a new category in the app called Uber Chap Chap which costs much less for a ride in a smaller car. More riders now use Chap chap as they are able to save considerably. Drivers who signed up later also prefer the smaller cars due to their fuel efficiency.

Read also: Uber Quietly Introduces “Connect” Delivery Service In Kenya

However, for those who had invested in the larger cars previously required by Uber with more powerful engines, the future started looking bleak.

Uber got a surge in the number of drivers signing up and slashed the basic income from around Sh60 per kilometre to a third of that. It does not help that fuel prices in Kenya are high and car maintenance is costly.

Besides paying for the cars, drivers had to pay for Uber training fees and make annual payments for a Public Service Licence (PSV), Certificate of good conduct, Insurance and car inspections. Operational expenses include fuel, car washes and mobile airtime and data for their smart phones.

Read also: Uber Protests Proposed 15 Percent Commission Cap on Trips

Interviews with more than 80 former Uber drivers in Mombasa and Nairobi show that they are drowning in debt. Most of them said they did not understand exactly what they had signed up for. They had simply ticked off the boxes at the promise of getting more customers.

Many of the Uber drivers initially leased their cars, some using channels facilitated by the company. The app based company now has about 12,000 drivers under its belt. About 80 of the drivers interviewed by The Guardian said they were struggling to make ends meet.

Paul Oyier, a labor economist at Stanford University’s Graduate School for Business said that, at least in the United States, drivers on the platfrom own their cars.

“It doesn’t make a lot of sense to go out and invest a lot of money in a car for the sake of driving it for Uber — there isn’t enough money to be made for your time and the costs of car ownership.”

Read also: Curfew: Ride-hailing Firm Uber Suspends Operations Between 6pm And 5am

Most Uber drivers in Kenya reported that they do not own the cars, and instead rent them from other people.

Before the Covid-19 pandemic made the situation even worse, some Uber drivers were already selling off their electronics to foot bills, while others decided to live out of their vehicles.

Peter Mwinga quit driving for Uber in 2019 and now sells fruits and vegetables off the boot of his Toyota Fielder, which he is still paying for. He says he makes more than he did driving people around the city, and with the car being stationary most of the day, he takes home more than he would have driving. Mwinga says he cannot advise anyone to join Uber.

Uber’s approach to dealing with competition often leaves its drivers bleeding dry. When other digital taxi apps launched in the market, Uber slashed its prices by about 35 percent. Drivers were promised better returns from increased demand, and a compensation of the difference from the company.

Read also: Mixed Reactions After Tweep Reports Drunk Uber Driver (Video)

“The price changes did lead to an increase in trips, but drivers were working harder and, mostly, earning less,” said Alissa Orlando, a former Uber East Africa operations manager who has since left the company.

“Moreover, she said, Uber was simultaneously onboarding more drivers than ever, meaning there was more competition for rides.”

“The company is not built to make money off rides; it is built to eliminate all meaningful competition and then profit from this quasi-monopoly power.” Huber Horan, a transportation expert, alleged in a 2019 article in the public policy journal American Affairs,

Orlando studied the commercial aspect of driving an Uber while in office and was left with a lot of questions. Assuming the base price of a car was $3000, Uber only accepted those that cost about $7,000 and with a partnership with Sidian Bank at the time, the vehicles cost $15,000.

Read also: Uber Suspends Operations In Uganda Following Ban On Public Transport

Orlando believes the company continually misleads itself regarding the real cost of operations. As it unfolded, it seems her hands were tied.

“I was told by multiple people, especially out of the Johannesburg office, that advocating for drivers was going to be detrimental to my career and progression within the company,” she said.

“The Uber business model values high rates of driver/rider transactions to increase the company’s overall valuation by saturating markets with Uber.” Orlando said.

Orlando left the company only 7 months after joining in August 2016.

Drivers invested heavily, some even selling their existing Taxis and personal cars to buy Uber compliant vehicles.

Read also: Bolt Secures 100 Million Euros Investment, Promises Uber A Run For Their Money

“There was a time when we were only selling cars to Uber drivers or guys who were doing business with Uber,” said Raymondu Gitau, a manager at Bolpak Trading Co., a dealership in Mombasa.

Stanbic Bank, in partnership with Uber and CMC motors entered into  a deal offering drivers low-cost vehicles valued at Sh 835,000 at 14 percent interest to be paid over three years.

In May this year, the bank said it was closing in on loan defaulters, a large percentage being Uber drivers.

Stanbic bank put out an advertisement auctioning 72 vehicles, 31 of them being Suzuki Altos which are synonymous with Uber Chap Chap.

Read also: Uber Implements Safety Measures To Help Curb Spread Of COVID-19

Sidian Bank, which had also offered loans for Uber drivers has also been repossessing the vehicles as the drivers now had very little business. The bank told the Guardian that the program with Uber had been terminated.

Munala tried to pull through the Covid-19 peak period, but his licences expired and rides declined. Once he was evicted from his home, he developed a terrible cough that strained his abdomen to the point where he had to get surgery to repair an incisional hernia. He has since rented out the Toyota Passo and collects the money to pay off his debts.

A visit to several Uber Drivers’ social media exposes deep frustrations in the model. Many drivers are evidently struggling to keep offering above par services with barely any income.

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Written by Vanessa Murrey

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