Uber in South Africa: great for riders, what about the drivers?

The ultimate expression of capitalism, or lighting the way for a global consumer led revolution? Pamela Whitby explores how Uber is working its magic in South Africa

Innocent, Julius and Piwe all drive for Uber in Johannesburg. In August all three drivers were taking, on balance, between $550-$580 a week; that’s before petrol ($132), vehicle repayments and, of course, the 20% cut taken by Uber. To achieve those figures, all agreed that they would need to complete - give or take - eight rides in a 12-hour period.  

On paper that looks pretty good, considering that from July 2015, the minimum monthly wage set by government for taxi drivers was around $232 (ZAR3020.67).

However, as Uber continues to put more drivers on the road, there are concerns that the good times may not roll forever, particularly for those who have invested in their own vehicle.

Vehicle owner, Piwe, has been Uber-ing for just over six months and in that time has already seen weekly takings fall by 20%. While he is still “doing great” he worries that supply may continue to outstrip demand as Uber puts more drivers on the road.  Since launching in South Africa in August 2013, Uber has created 2,000 jobs for drivers, mainly from disadvantaged communities, and says it could “easily create another 15,000” over the next two years.

Uber SA stresses that it is working “carefully to ensure that supply matches demand in all cities in which we operate”. The question is will that be too much? If you speak to Uber drivers in London, the trajectory seems to be that you can do really well in the early stages of launch but then as the competition fights things are less rosy. Surge pricing was introduced to deal with the issue of high demand but what of the issue of over-supply?

In South Africa, so far, so good

In the travel world, we hear time and again that today it’s all about the user experience. Uber has this down pat: the user comes first, second and third. In South Africa, where a positive customer experience is the exception, this policy has paid off, and the company has quickly garnered a loyal following. Last year, Uber facilitated over million trips in South Africa and by the end of the first half of 2015 had already doubled that number!

To gain, a foothold, as it’s done in every market, Uber initially undercut prices of the competition while providing a safe, comfortable and convenient ride. All cars must be a 2012 model or newer, and drivers must jump through several hoops before being accepted. In South Africa’s cities, where safety and security is an issue, being cashless is another boon. As a result few, including partner-drivers, will dispute that Uber has provided a welcome boost for competition to both metered taxis and public transport.

I use Uber all the time. Compared to the metered taxis which are more expensive, not to mention falling apart, there is simply no comparison.

Regular Uber user

One regular Uber rider, a financial analyst, told EyeforTravel: “I use Uber all the time. Compared to the metered taxis which are more expensive, not to mention falling apart, there is simply no comparison. I’m even considering Uber-ing to work everyday as it’s cheaper than driving.”

Innovation leading regulation

South Africa is, however, a complex place and it hasn’t been an entirely smooth ride. Like elsewhere in the world, Uber partner-drivers have faced threats from the metered brigade. The argument goes that licensing requirements and conditions for the technology led upstart are much less onerous than those for traditional operators.

What’s clear is that existing South African legislation doesn’t adequately address the conditions for operators using a technology platform like Uber. Nor is it obvious how firms like Uber should meet South Africa’s strict broad-based black economic empowerment (B-BBEE) objectives.

So, in Cape Town this month, Uber appeared before the Parliamentary Portfolio Committee to shed some light on its business model and relationship with partner-drivers. Uber argues that it “embodies the spirit of B-BBEE” and that it has “enabled hundreds of independent operators to scale their businesses and grow their income in a way that they could never before”.

It’s indisputable that Uber is doing its bit for employment; 25% of the population in South Africa is unemployed. But the firm is also quick to stress that partner-drivers are not employees. And although Uber takes any situation “where driver or rider safety is compromised very seriously” in an environment where labour rights are such an explosive issue, there is a tricky balance to strike.

National government will no doubt be scrutinising this, among other things, as it looks to introduce a new category for Transport Network Operators in the National Land Transport Act (NLTA). 

Although Uber’s “surprisingly small” (though it won’t disclose numbers) team in South Africa has not yet seen the details of this proposed new category, it “looks forward to playing a constructive role” as an “innovator leading regulation”.

The rise of technology companies like Uber, that use mobile technology to connect a service provider with a user for what some would argue is too chunky a commission (20%), has been nothing short of phenomenal.

This could partly attributed to Uber’s policy of treating the cities that it operates in as start-ups and giving free rein to the teams running the show,

However, as Uber’s IPO draws ever closer – and it grapples with how to keep friends in high places sweet – we’ll be watching the revolution as it unfolds and wondering if there is competition in the wings preparing to accelerate.

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