A proposal to introduce a mandatory minimum fare for ride-hailing services has sparked fresh concern among digital taxi operators, who say the planned changes could push passengers away, reduce drivers' trips and wipe out billions of shillings generated by the sector every year.
The operators say proposals to set the minimum fare for taxi rides at Sh500 could reduce the size of Kenya’s digital transport market by up to 40 per cent. They maintain that the industry has become a major contributor to the economy, generating more than Sh50 billion annually while providing income to about 40,000 drivers and couriers in Nairobi alone.
A study by ride-hailing company Uber estimates that the proposed fare controls could remove about Sh20 billion from the economy each year as many customers choose not to book short-distance rides because of the higher charges.
The Ministry of Transport and the National Transport and Safety Authority are preparing new rules that would increase minimum trip compensation from about Sh220 to between Sh400 and Sh500. The proposal is meant to cushion drivers against rising fuel prices, vehicle maintenance expenses and other operating costs.
Ride-hailing companies, however, argue that forcing higher fares will not improve drivers' earnings if customers begin cutting back on the number of trips they make.
According to the company, a driver who completes twelve trips worth Sh300 in a day would take home more than one who only manages two Sh500 trips, while still meeting fuel, insurance and vehicle financing expenses.
Another leading platform operating in Kenya said its records show that passengers closely watch fares and are quick to cancel or avoid rides whenever prices rise or discounts become too small.
The companies also warned that a fall in trip numbers could leave many drivers who purchased vehicles through financing programmes struggling to repay their loans.
“If drivers lose trips, many will be unable to meet their daily repayments, leading to repossessions and loss of livelihoods,” the firm said.
The operators said government regulation should give priority to passenger safety, service quality and consumer protection instead of fixing prices. They argue that allowing the market to determine fares would create a better balance between drivers, passengers and the platforms.
The firms also noted that Kenya already has an 18 per cent commission cap for ride-hailing platforms, one of the lowest globally, compared with 25 per cent in many countries. They said the lower cap reduces the resources available to invest in customer discounts, driver rewards and improved technology.
The operators further questioned the requirement for annual operating licences, saying one-year licences make it difficult for companies to plan long-term investments and expand Kenya's digital transport industry.