Ride-hailing apps: Will tech solve our transport issues or will the issues break the new companies?

There is a new ride-hailing app in town: Dial Jack. The boda-hailing app officially launched on Wednesday offering free rides for the day and half-price for a month after.

It will join SafeBODA, uberBODA and TaxifyBODA in the business – alongside other companies like Little Cab, a new entrant too, which offers app hailing cab services. All of these companies have in the last few months introduced changes to their service and pricing to remain competitive.

Safaricom-backed Little Cab’s representative Jefferson Aluda told this website in an email interview that the company “will probably think of boda boda but as for now our main focus is to be the face of digital cabs in Uganda and Africa as a whole.” Their launch in the Kampala market – which had two times the number of targeted drivers – came after the diversification into the boda boda market by Taxify and Uber.

There is a high likelihood that Uber, which was the first cab-hailing company to launch, is not making any money from the market. Most drivers do not pay the 25% commission owed to the company and maintain high negative balances on their account. To keep earning, they only drive cash paying customers and reject requests from riders using credit cards.

It remains the most widely known especially by visiting foreigners though so its customer base shrinks little despite the unreliability of the drivers.

The other companies have been able to make their commission due to aggregations with mobile money paying systems as well as strict regulations on payments. “Taxify does not play. They remove you when you don’t pay them,” one driver who is signed up both with Taxify and Uber told us.

When asked about company earnings during a press conference on yet another price cut on June 7th, SafeBODA co-owner Ricky Thompson remained coy and gave little details. “We make enough.” The company has over 1000 drivers and over 60 fulltime employees. Started in mid-2014 in Uganda, any shortfalls from the business are offset by financial support from the Shell Foundation, Development Innovation Ventures USAID, the Global Innovation Fund, and a private tech company. This backing – about $1m in total – is the only way that the company was able to move from its offices in Kanyanya (they were in a one-room house in Kyebando before that) to fancy headquarters with a Silicon Valley-feel on Plot 1, Bukoto Street.

The company got a convertible note – short-term debt that converts into equity – of $230,000 from Global Innovations Fund in 2016 to help it through its pilot phase and offer relief as they prove demand for the service. The Fund invested because “road traffic safety is ripe for innovation and disruption.”

From Shell Foundation, SafeBODA got grants of $1.2m in 2016 and $100k in 2015.

SafeBODA though has pushed a different mandate from all the other companies – theirs, they have always reiterated is centered on road traffic safety. Their drivers are taught road safety rules and trained in first aid as first responders. “The heart is road safety,” Ricky Thompson said.

The others however are in it to move Kampala. We are not sure if they have seen any increase in trips. According to a recent World Bank report on the Greater Kampala Metropolitan Area, about 42% of trips in the Kampala metropolitan are boda boda trips but only 9% of them have passengers. Most trips might either be boda boda riders on hunts for customers or errands that do not require the transportation of passengers.

But whether they are making money or not, the transport sector is one that requires disruption and alternatives. The Kampala Metropolitan area has a day population of about 4 million people, and an inadequate messy transport network.

This would be the gap that the e-hailing apps, for both boda bodas and cabs. With more than 400,000 vehicles on the roads, the city has four times as many cars as its road network was designed for in the 1960s.

The congestion is so bad, that the Ministry of Transport estimates that 40% of commute time during rush hour is spent at standstill. Investments targeting the sector and connectivity within the city have been made with the construction of the Northern and Southern bypass roads and traffic control systems to help bring order to the madness at the busiest junctions.

Drivers with the companies will tell you though that the roads are one of their top problems – right after the ride prices offered to customers, which they feel are not in tandem with the increasing fuel prices in the country.

“There are places I do not go,” one driver told us. One of the places he mentioned is Kira, an up and coming neighbourhood in Wakiso (part of Greater Kampala Metropolitan Area). Some of the roads connecting to residences, he said, cause too much damage to his car and it does not make financial sense to take a rider for Shs20,000 – that is if they do not have a discounted ride – from central business district to Kira through hours of traffic and murram roads that might cause damage worth Shs60,000.

Without the car service charges though, a driver who stays online for eight hours a day is able to make a sufficient income. Many of them do not own their cars and are fulltime drivers who pay the car owners Shs250,000 a week. For some, they pay as much as Shs300,000.

“But we make most of it with off-app rides,” another driver countered.

The off-app rides are driven by connectivity issues, scarcity of drivers in certain areas and also in part by the relational culture of the city’s people. For these rides, the drivers are able to negotiate for more and while they are not making as much as the more highly priced special hires, they certainly make more than the app prices.

Some might say that it is still early days for the companies, which remain unregulated. The entrance of new competitors allows each of them to think of new ways to remain relevant to users and attractive to new users. They have mobile money payments, SOS features, ability to request a ride without network and more discounted rides.

And we need them because obviously movement in Kampala otherwise is too expensive with no set price regulation for trips, too disorganised, too unsafe and too slow. But do these companies need more app features to stay relevant and become profitable or are they doomed by the city?