The capital city is experiencing new taxi-hailing local services that mirror the operations of the global giant in the industry, Uber. Some of these companies have been using Code-3 commercial vehicles, unlicensed for public transportation, which triggered transport authorities to halt the issuance of taxi licenses until regulations are drafted. The decision has alarmed operators, users and drivers, reports BEHAILU AYELE, FORTUNE STAFF WRITER.
Naod Gemechu stands in front of the Sheger Building on Cameroon Street on a blazing Wednesday at noon waiting for his car to get an inspection and the identifying logo at the office of the taxi-hailing service, Ride.
“I’m very excited to seize this opportunity,” said Naod. “I’m finalising the process, and I can’t wait to see a change in my life.”
Ride is one of the few taxi-hailing services launched in the city since March 2017. Its competitors include TaxiVa, Zayride and ETTA, companies that provide service under code-1 sedans and minivan taxis – vehicles licensed to operate in public transportation.
In the past few months, however, some technology companies have expanded their services to provide transportation services through code-3 vehicles, commercial vehicles licensed for businesses.
“I got the license from the city district’s trade office,” Naod says.
He paid 6,000 Br for a trade license which allowed him to obtain a code-3 license plate and inclusion into Ride’s taxi system. Naod expects to earn 1,000 Br in revenue on a daily basis.
The average service cost of these taxi-hailing services is 18 Br a kilometre, with the fare calculated based on the distance and the length of time it takes to complete the trip. The companies receive 15pc to 17pc of a driver’s total earnings during the day and 10pc during the night.
Nonetheless, two weeks ago the Addis Abeba Driver Vehicle Permit & Control Authority ceased issuing code-3 license plates to operate as rental vehicles.
How long the suspension will last has not been specified, and the decision has not boded well for Naod and other drivers.
“Our license specifically states that we can engage in public transport,” he says, adding that he continues to be engaged in the business.
The Authority halted the service to develop a formal framework for vehicles with a passenger seat capacity of less than 10 people and an engine capacity of 1,600cc engines.
“The companies are engaged in a business that their licenses do not permit them to operate,” says Dawit Zeleke, the director general of the city’s Transport Authority. “They are setting traffic routes for the cabs through their call centres and are working with vehicles that are not registered for public transportation.”
The Federal Transport Authority also agrees with the decision made by the city administration.
“They have violated the commercial law by using Code-3 vehicles as public transport vehicles without the proper licenses from the Authority,” said Alamaz Beyero, deputy general director of the Federal Transport Authority. “Besides, taxi-hailing companies are not legally registered to run public transport services.”
The city government is also looking at the price levels of the taxi services, which it says are 30pc higher than government-set tariffs, and accuses them of disturbing the market system. Code-2 vehicles, licensed for personal use only, are also under scrutiny, as some are found engaging in public transportation.
Ride has received a notice from the Authority to cease operations using code-3 vehicles for public transport services.
“But the letter does not explicitly state that we have to stop what we are doing,” said Samrawit Fikru, the co-founder and CEO of Hybrid Design Plc, the mother company of Ride, which currently works with over 750 cab operators. “We are a legally recognised company working to facilitate the transportation system, nor are we assigning routes to drivers.”
Ride’s passengers have downloaded the company’s app over 10,000 times. Its competitor, ZayRide’s app, has been downloaded 5,000 times to date. The owner of Ride, Hybrid Design Plc, is scheduling a media briefing to clean up the uncertainty surrounding the government’s actions.
Meanwhile, the Federal Transport Authority has commenced preparing a preliminary draft guideline for ride-hailing companies and code-3 vehicles operating in public transportation services.
The draft will be put forward before stakeholders in the transportation industry, including metred-taxi owners and drivers that applaud the recent decision by the city Authority.
“We have been working with these technology companies for over a year now,” says a metered-taxi owner that wanted to remain anonymous. “The system they introduced is helpful, but their move to begin working with the code-3 vehicles negatively affects our business.”
The city imported 1,663 yellow taxis in a bid to modernise the transportation system and to promote tourism in the city. The yellow taxi owners are to pay back the debt over seven years.
Taxi associations have likewise been resistant toward taxi-hailing services and have lodged complaints with the city Authority.
“Most have stopped working with the tech companies as their share of a driver’s income is high,” Almaz told Fortune.
Despite the current friction though, the authorities have initially been supportive of the taxi-hailing companies. Back in 2016, code-1 vehicles were allowed to be imported into the country duty-free.
“We commend the technology they brought,” Alamaz says. “They can work with the registered cabs and other Code-1 taxis.”
Their entry has been considered one of the ways of addressing the problem of public transportation in the city.
While road networks are growing by about 10pc each year, 60pc of the 900,000 vehicles in the country are found in Addis Abeba, lending itself to heavy road congestion, particularly during rush hours.
Additionally, the city’s four million residents need at least 17,000 public vehicles to satisfy demand, according to the city’s Transport Authority. The government has only met 69.7pc of this demand, according to the Authority, which collected 14 million Br from services, fines and registration fees for 7,577 code-1 cabs and 11,688 minibuses last fiscal year. Currently, 2.8 million people use the public transportation system daily.
Addis Abeba is not the only city that is grappling with taxi-hailing services.
Globally, the leading brand is Uber, a United States-based company with a pioneering software application by the same name. With a strong presence in North America and Europe, it has established its own footprint in Africa by launching operations in Egypt, Ghana, Kenya, Morocco, Nigeria, South Africa, Uganda and Tanzania.
Many African nations have tried to modernise their transport system by introducing similar taxi-hailing platforms. Kenya’s capital Nairobi has over 2,000 drivers that operate through internet hailing companies, with more than ten apps launched in the last three years alone.
The industry in Kenya though is plagued by hurdles, as drivers and customers decry poor regulations in the sector, high commissions paid by cab drivers and owners to the taxi-hailing firms and unfair pricing as a result of constant price wars.
To address the issue, Kenyan authorities wrote a regulation to guide the price by the average operating cost of the public vehicle and to allocate the burden of the tax to the owner rather than the service providers.
Uber has likewise faced steep resistance from traditional taxi owners and whether it should be regulated as a technology company or a public transport service provider has generated controversy.
Among users though, taxi-hailing services usually do not court as much criticism.
“The decision is nonsense and backward,” says Samuel Alemayehu, a marketing businessperson who uses the service often. “The decision to halt such new innovative businesses discourages others from coming to the fore.”
Fikadu Gurmessa (PhD), transport geography lecturer at Addis Abeba University for more than a decade, agrees with Samuel’s assessment.
“I believe there should be a regulation for such innovative businesses,” Fikadu says. “Yet rather than making them cease operations, the authorities have to work with the innovators and try to accommodate the new way of doing business.”
Nonetheless, the city Authority believes the violators have to cease, while a clear legal framework can be approved and be announced publicly.
“We have notified police about the case,” Almaz says, “as we already discussed with all those concerned and reached a consensus.”
Meanwhile, Naod successfully and cheerfully carried out his business last week, picking up customers with his code-3 vehicle.
“The business is so good so far,” Naod says.
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