Taxify’s first month in Kampala: the battle for riders is first a battle for drivers

Sheebah Karungi was Taxify’s Rider Zero at its official launch. The ride-hailing app launched in Kampala on Friday, 27 October. Credit: Uganda Business News

In recent months, the narrative on ride-hailing apps has changed from the sighs of relief that accompanied their arrival in Kampala to frustration.

The frustration was on both the riders’ and drivers’ sides. Because the riders outnumber drivers and have more incentive to voice their anger, their frustration is often louder. We have heard of drivers using screenshots, riders paying with cards having their request cancelled by drivers, cancellation fees charged “unfairly,” and even complaints about surge pricing.

The discontent on the driver’s side intensified when Uber cut prices in February to “boost rider demand.” More riders would mean more money for the drivers, Uber said.

But the drivers didn’t buy this; even with more riders – and we are not sure if those increased – their pay was little. It was particularly frustrating for them to receive “little amounts” after short trips, yet in some cases they’d driven longer distances to pick up riders.

These complaints were amplified by the fact that many drivers do not own the cars, but instead lease them. A typical arrangement is one where a car owner demand s a weekly payment of Shs250,000. This puts more pressure on drivers to make that amount and yet leave enough as take-home and to cater for contingencies. In this situation, credit payments – which are automatically retained by the taxi-hailing app – and low prices are a detriment to be avoided. The hustle is to make as much as possible.

It was in the middle of those disagreements between riders, drivers, and Uber (there are other taxi-hailing apps and services operating in Kampala, but Uber was by far the most dominant) that Taxify decided to explore the Uganda market.

Taxify could not have decided to enter at a better time.

Drivers were happy that a serious competitor had come in, a taxicab driver told us recently. (Uber and Taxify do not employ drivers and are keen to emphasise that; the drivers are classified as partners.) Fed up with Uber’s lower fares, they hoped the new player would offer better rates. Plus, Taxify was another option to make money from.

The driver told this website that most drivers who joined Taxify in its trial period did so on their accord. “Taxify did not have to do any marketing; we did it for them. It was us, drivers, who would tell Uber customers to download Taxify and use it instead of Uber.”

Taxify might not have started with the generous incentives that Uber entered with in 2016, but it still appealed to drivers on one crucial aspect; its commission for delivered rides is only 15% compared to Uber’s 25%. In their meetings with Uber after the fare cuts, drivers had insisted on two things: a reduction in its commission, and an increase in its minimum fare.

On the first demand, the drivers were unsuccessful. The 25% commission is applied universally in all the markets the Silicon Valley company operates, and reducing it here would mean giving in to similar demands elsewhere. Uber also refused to budge on its minimum fare.

Eventually, as Taxify signed up more drivers and gained more customers – or when Uber got wind of the threat – it increased its minimum fare, from Shs3000 to Shs4,500. It also intensified its efforts to sign up even more drivers.

At the end of October, Taxify announced that it was officially launching in Kampala. The announcement also came with a 15% discount on its prices, which was increased to 50% less than a week later.

Uganda was only the third sub-Saharan African country Taxify was launching in, after South Africa, Kenya, and Lagos. In those countries, the Estonian app had operations in Johannesburg, Pretoria, Cape Town, and Durban; Nairobi and Mombasa; and Lagos – although it has since expanded to Port Elizabeth and Abuja.

Taxify’s operating manager in Uganda, Shivachi Muleji, said they had been attracted to Kampala because of its open regulatory environment and because it was a “ready” option – internet is available and there is a willingness to embrace technology. It is also a big city of close to 2 million people, who between them drive 350,000 vehicles.

Taxify’s discount was exciting to customers and increased interest in the app. In November, it was the most downloaded app in Kampala. Riders were happy, but how did the other crucial part of the equation feel?

Drivers were less enthused about the discount, even though Taxify was compensating them for the difference. The app pays the drivers every week by depositing money into their accounts. But this mattered little.

The ideal situation to the typical Ugandan cab driver is receiving as much cash as they can at the end of the trip. More money means being able to fuel the car, and more take-home pay at the end of the day. To delay this at the end of the week is unfeasible.

A number of drivers we spoke to said that much as they had registered with Taxify and were now ‘driver-partners’, they would not come online until the discount window had ended. Taxify paid little, they said, waving away the fact that they would eventually be compensated at the end of a week. “What matters is what I am taking home, and having money to repair my car in case of any issues,” one told us.

With drivers going offline, it became more difficult for customers to find rides. Customers found that while they could order rides, the drivers were usually a good distance away from them. In most of those cases the drivers would tell the customer to cancel or ignore them since cancelling attracts penalties for the drivers.

Like someone asked on Twitter, what is the use of low prices if you don’t have drivers? That is the quandary the app finds itself in. A bold decision to get users for its app has kept away the drivers it needs for its service to work. And a customer who has failed to get a ride will blame the app, saying it does not have drivers.

Taxify seems to have listened to the drivers. An email to customers said it is reducing its discount by half to 25%. Customers pay less than they would pay with a competiting service, but the drivers barely feel this because of the lower commission. The lower discount increases the driver’s take-home pay. It also signals to them that Taxify listens to their grievances.

It is a delicate balance for the new ride-hailing app. Unlike Uber, which had the luxury of dealing with the fallout of its reduced rates and driver reaction to the move in a market with few meaningful competitors, Taxify has to contend with the more established company. Riders have options, and they are quick to move. The drivers too will still get requests from Uber – for which many of them are also signed up as driver-partners.

But it emphasises one thing, which has also been noticed in other markets: the battle of dominance in the app-hailing space is a battle for drivers. Whoever wins the drivers is set to come out on top.