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The East African : Mar 30th 2015
The EastAfrican OUTLOOK MARCH 28 - APRIL 3, 2015 startups In Nai≥obi, a cab is a click away; but is the business model viable? By ALLAN OLINGO The EastAfrican GETTING AROUND in Nairobi without your own car can drive you crazy. The traffic gridlock and the arrogant and careless motorists with their daredevil driving will test your patience at the wheel. But some taxi companies have come to the rescue of commuters, providing apps that will allow one to hail cabs from the comfort of the office or home — on a smartphone or computer. One such app is Uber. I recently tried it out. After downloading the app on my phone, keying in credit card details and creating an account, I requested a driver to Hurlingham in the west of the city. The site said the driver would take seven minutes but he arrived after half an hour. I could track car’s movement on the GPS and I could see as he weaved his way through heavy traffic on Valley Road and Kenyatta Avenue to Kimathi Street. The Toyota Corolla NZE he was WHAT’S TO BE DONE Integrate disparate African economies; Invest in the postal, broadband and transportation infrastructure; Institute a pan-African system to prosecute fraud and improve business trust online; and Boost literacy. online; and, most importantly, a significant boost in the literacy rate. To make the Web work for business, African leaders need to focus less on how to increase the total number of domains registered and instead make the Internet’s physical ecosystem work better for entrepreneurs. A woman shops online. Rich Africans have yet to embrace online shopping, due to Internet fraud. Picture: File The Internet is transforming commerce and will continue to reshape industrial sectors. Africa cannot afford to avoid participating in the opportunities that the Internet is enabling through the expansion of markets. But before they jump in, African entrepreneurs — particularly those building Webbased businesses — need to understand the hurdles they will have to overcome in order to be both successful and profitable. Ndubuisi Ekekwe is a founder of the nonprofit African Institution of Technology and the editor of Nanotechnology and Microelectronics: Global Diffusion, Economics and Policy. — New York Times Service driving was decent and comfortable, complete with air conditioning. We made it to Hurlingham in time, and I parted with Ksh600 ($6.5). The new “digital” taxi compa- nies, Uber, Mara Moja, Sasa Cabs and Easy Taxi, are fighting for the Nairobi cab market, which has long been segmented into the high-end and the “local” cabbies. Their impact will largely depend on how the new apps help capture the market by providing a needed service. To start with, there are only 208,503 credit cards in the country, according to available statistics, and therefore it may be hard for Uber Taxi, for instance, to capture a sizeable chunk of the Kenyan market, as it requires one to have a credit card. Individual operators and other taxi companies accept cash and mobile money transfer, particularly M-Pesa. This sets them apart from Uber. Taxi culture In a recent commentary in USA Today, Jacob Cusher argued that Uber has not taken the local Kenyan taxi culture into account. “The truth is that Nairobi is not Make your first sale, and the rest will follow. The key to making that first sale, though, is perfecting your business pitch. Picture: File Brooklyn or San Francisco with the challenges in the Kenyan capital ranging from infrastructure to technology, know-how and a different labour force. From the use of maps, credit cards, smartphone penetration, trust issues and payment model, Uber needs to rethink its model for it to prosper in Nairobi,” Mr Cusher wrote. Alastair Curtis, Uber’s inter- national launcher for Africa, said they understand the concerns about credit card use and are working to open up the platform for other payment modes like MPesa. Easy Taxi, for its part, does not own the vehicles but instead 35 A customer uses the Uber app on a smartphone. Picture: AFP We ensure that drivers have ID cards, drivers licences, certificates of good conduct.” Peng Cheng, Uber executive works with partners to provide the service. Chief executive Peng Cheng said their partner drivers accept cash, M-Pesa and corporate payments so as to make it easy for their customers to use the service. “We understand the concerns of using cards for payment in this market. The use of mobile money makes transfer of payment much easier. We want to provide passengers with as many options as possible for their convenience,” said Mr Peng. Another concern is the etration of smartphones in Kenya, at a paltry 5 per cent. “We believe that a majority of the Nairobi market we are targeting are tech-savvy. These are people on social media. That’s why Easy Taxi is available on multiple mobile platforms, including iOS, Android, Windows, Blackberry 10, and Firefox OS. For users who don’t have access to a smartphone, we are also available on any Internet browser through our web app,” Mr Peng said. Smartphone users can download the Easy Taxi and Uber applications from an app store — Google Play or Windows store — and create an account. For Easy Taxi, when you need a ride, you press “request taxi,” fill out your address and the application will search for the partner taxi driver near you. You will be able to track your cab in real-time. The same applies for the Uber app. In terms of pricing, Uber Nai- robi has set the base fare at Ksh100 ($1.06), charged at Ksh4 ($0.04) per minute and Ksh60 ($0.64) per kilometre. The minimum fare is Ksh500 ($5.33), while the cancellation fee is Ksh300 ($3.19). This model has been criticised as unworkable. “It’s using the same model for its United States market, where it charges not just by distance, but also per minute. How can you charge per minute in a traffic-choked city? You will make the users pay thousands for a service that’s not worth the amount because of the traffic gridlocks,” Mr Cusher wrote. Easy Taxi quotes a maximum threshold price beyond which the passengers cannot be charged over the quote price. This acts as a safeguard, especially for the traffic-choked roads. It also allows for bartering, which works to the passenger’s advantage. low pen- Tracked and monitored Passenger security is a key con- cern for all these taxi firms. Mr Peng said that all of the vehi- cles are tracked and monitored. One of the key limitations is that the cab drivers barely understand the business model and how they will make money. “We do not employ drivers nor own these vehicles. All we do is to work closely with a large community of individual, entrepreneurial, and tech-savvy taxi drivers to provide a better transportation solution for Nairobi’s passengers. Our partner drivers make money whenever they complete an Easy Taxi ride and are paid by the passengers,” Mr Peng said. Uber has a different approach: It plans to have a car pool, hire some cars and contract individual car owners to provide the service “Nairobi residents are progres- sive and tech-savvy. They love products that offer new experiences and that’s what Uber gives. With our taxi app, you will enjoy a seamless, efficient and safe ride at an affordable price,” Alastair Curtis said.
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