Uber Kenya recently announced a significant fare hike across all ride categories, a move that has sparked discussions on how it will impact both drivers and consumers in the country. This decision follows growing frustrations among ride-hailing drivers, who have been demanding better pay and more control over pricing. The fare increase is aimed at addressing these concerns, but in a price-sensitive market like Kenya, this move could have far-reaching consequences on consumer behavior.
The fare increase comes on the heels of a five-day strike in July 2024, during which Kenyan ride-hailing drivers protested for better compensation and the removal of value-added taxes (VAT) that cut into their earnings. The drivers, who bear the brunt of expenses like insurance and parking fees, argued that the existing fare structure was unsustainable, leading many to either set their own fares or refuse service to passengers who were unwilling to pay higher rates. On August 13, 2024, drivers challenged ride-hailing apps over fare rates, advocating for an increase in the minimum fare from KSh180 ($1.40) to KSh300 ($2.33). While Uber’s new pricing model raises the minimum fare to KSh220 ($1.73) for some ride categories, it falls short of the drivers’ demands, indicating a compromise that still aims to balance drivers’ earnings with consumer affordability. However, in a market where consumers are highly price-sensitive, even a small increase in fares can lead to significant behavioral shifts.
A significant portion of Kenya’s population relies on affordable transportation with alternatives like matatus (minibuses), boda-bodas (motorcycle taxis), and traditional cabs providing more economical options for many commuters. The World Bank notes that public transport fares in Nairobi are generally lower, which could make these options more appealing as Uber’s prices rise. With Uber’s new pricing, consumers who have depended on the platform for cost-effective rides may now begin to shift to these less expensive alternatives, given that 74% of salaried Kenyans earn less than KES 50,000, less than $500 per month. Data from the Kenyan National Bureau of Statistics highlights that nearly half of Kenya’s urban population lives on less than KSh200 ($1.56) per day.
This also means Uber may experience a decline in ridership as cost-conscious consumers opt to cut back on non-essential trips or seek out cheaper transportation methods. According to a report on the Flip Africa, there are only about 25% of Nairobians that have ever used a ride-hailing service and only 11% do so regularly. If these pricing discrepancies continue alongside the fare increases, Uber could face a significant challenge in retaining its customer base.
The fare hikes could also inadvertently boost the presence of ride-hailing operators, who often offer rides at lower prices by bypassing app-based pricing models. This trend could erode Uber’s market share, especially among price-sensitive riders who are increasingly looking for more economical options. In June, Kenya experienced significant economic disruption due to widespread protests against the Finance Bill 2024, which proposed increased levies on various goods and services. The bill exacerbated the financial strain on a population already grappling with high living costs, leading to nationwide demonstrations. Thousands of Kenyans took to the streets in what many described as a revolutionary response to the economic hardships, voicing their discontent with the government’s taxes. According to Statista, the ride-hailing market in in Africa is projected to grow by 11.02% (2024-2029) resulting in a market volume of US$3.39bn in 2029. Uber’s ability to maintain its position in the Kenyan market will depend on how effectively it can balance these competing demands, ensuring that both drivers and passengers feel valued and fairly treated.
