Big promises, bigger debts: Uber leaves trail of misery in Kenya

NAIROBI, Kenya – At first, working as an Uber driver seemed to be everything Harrison Munala had hoped for when he moved from a city in western Kenya to the capital, Nairobi.

Uber seemed to be the answer to Munala after working informally as a house cleaner and school bus driver for nearly 15 years. Many of the energetic hustlers with civic ambitions who flock to the economic hub of East Africa thought so too.

Working with Uber has been so good that Munala, now 34, made money about three years ago after driving a car for a year that he privately rented for 15,000 shillings a week (about $ 150 at the time) borrowed from his sister the deposit on a Toyota Passo, a small car. And he took out a loan with Izwe, a pan-African microfinance and credit company.

Now, Munala thought, he could work for Uber and pay for the car. Then he could expand his business, buy another car, and hire someone else to drive it.

“I felt like I made it in life,” he said.

Harrison Munala and his family were evicted from their home in Nairobi, Kenya, in August. They seek refuge in a church while he tries to raise money to build a house.

Nichole Sobecki / for NBC News

Four years later, he grimaces when he remembers those dreams.

Uber cut its tariffs – and Munala’s income. In addition, new vehicle categories have been introduced that allow smaller vehicles. And more people started taking the smaller cars because they were cheaper and more economical.

This was detrimental to drivers who were already outfitted with the larger four-door cars with more powerful engines that Uber had previously needed.

More and more drivers flooded the platform, changing the basic premise that had led people like Munala to take out loans to become drivers.

And car maintenance is expensive. The fuel prices are high. Instead of owning an asset, Munala suffers from growing debt.

He fell back on his rent. He, his wife, and their three children were evicted from their home in August. They seek refuge in a church while he tries to raise money to build a house.

He tells his story on the roof of his former home with a view of Kwangware – a low-income neighborhood with tin and adobe houses between green, former colonial enclaves in West Nairobi.

On the way up the dark stairwell, he passes the unit in which he used to live. The door has a padlock.

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Munala described his defeat in a WhatsApp message – in hindsight – as almost inevitable.

“If you have a family to eat with, kids have to pay school fees, rent, pay a loan, and your job is too much and exploitative, what happens?” he said.

Ubers hard sale

Uber came to Kenya, a country of densely populated cities with no efficient public transport system, and was aggressively registering drivers while increasing the number of drivers by falling prices.

Interviews with more than 80 current and former drivers in Nairobi and the port city of Mombasa show that countless Uber drivers are drowning in debt in Kenya’s largest markets.

But Uber drivers in Kenya are not alone in their experience. In 2017 Uber agreed to pay the U.S. Federal Trade Commission $ 20 million Resolve allegations that it misled drivers with exaggerated profit claims and failed to provide accurate information on vehicle financing information.

In December 2018, researchers from Washington University in St. Louis completed that driving for UberX “increases the hardship among the population [low- and moderate-income] Population, mainly by lowering the overall take-away wage. “

Uber spokesman Noah Edwardsen said he was “unfamiliar” with the research, adding that another one study as of 2018, “has shown that carpooling can help offset declines in income and reduce the need to cut spending due to income shocks.”

To qualify for the Uber sticker, many Kenyan drivers borrowed large amounts of money to lease cars, sometimes through programs backed and promoted by Uber, sometimes through other companies.

Uber employs more than 12,000 drivers in Kenya. All 80+ respondents expressed distress and said they could barely make ends meet. A Labor Economist from Stanford University’s Graduate School of Business, the drove for Uber for research has similar results.

Paul Oyer said that in the US at least, drivers working on the platform might be happy with the business if they already own their cars or have other sources of income.

But he said, “It doesn’t make much sense to go out and invest a lot of money in a car to drive it for Uber – there isn’t enough money to be made for your time and time.” Cost of owning a car. “

The vast majority of Uber drivers surveyed in Kenya said they do not own their cars and instead drive “partner” cars – rent them from other people.

Lorraine Onduru, a spokeswoman, said Uber is offering “vehicle solution products” to drivers who are already on the platform.

“Third party agreements are discussed and agreed between the driver and the financial institution,” she said.

Onduru said there are channels through which drivers can submit questions to Uber and that the banks that Ubers programs are affiliated with are running financial literacy workshops.

Long before the coronavirus worsened the situation, some drivers made a living from their vehicles. Other drivers had sold their televisions and other electronics to prevent their cars from being repossessed – sometimes to no avail.

Former Uber driver Harrison Munala outside his former home on October 16 in Nairobi, Kenya, from which his wife and three children were evicted in mid-August after defaulting on their rent.Nichole Sobecki / for NBC News

Many said they didn’t understand the contracts they signed with Uber or with lenders. However, Uber said the onboarding process includes training to ensure drivers understand terms and conditions.

Some Uber drivers in Kenya are paying off their loans. Some tie their success to strategic timing or other sources of income. But many who have managed to repay their cars are still dissatisfied with Uber, saying that they are not making any money even now that they fully own the cars.

Peter Mwinga, who stopped driving for Uber last year, said he was making more fruits and vegetables with his Toyota Fielder, which he still hadn’t paid off after three years as a driver. He stood next to the vehicle parked on the roadside, filled with products, and said he wasn’t “advising” anyone to join Uber.

A toxic relationship

When Uber started operations in Kenya in June 2015, it was building on the remains of an empire whose structure had hardly changed despite independence. Kenya is the former British base in Africa, and the extraction-based colonial economy relied on masses of workers who benefited little.

Today these workers classified as “informally employed” make up 80 percent of the Kenyan population according to a 2016 World Bank report. Many work in construction, clean houses or sell used clothing, move from sector to sector and rarely make ends meet. Young women go through wealthy neighborhoods and offer to work as maids.

For many workers in Kenya, little seems to differ from the colonial days, except for the skin color of the leader.

Kenyans hugged Uber’s arrival. People needed jobs and the taxi industry was privatized. Before Uber, a taxi driver could pay almost as much in Nairobi as in New York. Most people got around in overcrowded “matatus” – unreliable buses that cost less than 50 shillings per trip, or about 50 cents.

A woman sells vegetables in the back of a vehicle in suburban Nairobi, Kenya on October 16. Some Uber drivers have adapted their vehicles for alternative purposes, saying they sell more fruits and vegetables than they drive with the app.Nichole Sobecki / for NBC News

Uber was a welcome addition: drivers had more customers, prices were controlled by the app – slightly lower than a private car – and drivers could get an Uber quickly.

In the beginning, Uber drivers made 60 shillings per kilometer – about 97 cents per mile. The company received a 25 percent commission and set requirements for cars it would subscribe to: they had to be relatively new, about the size of a sedan, and they had to have large engines, four doors, and four seats.

The government paid little attention to the entry of the new company.

However, private taxis backed off, saying Uber had harmed their business. In some cases in 2015 and 2016 Ubers were burned and drivers were harassed. Over time, as customers got used to the convenience and lower prices, drivers lost their regular customers and had to switch to the app to stay in business.

Uber expanded its ranks by approaching taxis in airports and parking lots.

“It didn’t have to be a heavy sale for the drivers as the number of customers increased,” said Julie Zollmann, a PhD student at Tufts University who has been studying finance, technology and living in Kenya since 2010, via email.

“It solved a big problem for independent drivers who otherwise only got a few trips a day, and at that point the rates were significantly higher than they are now,” she wrote.

In fact, by then – as Munala did with Izwe – would-be drivers were using their savings and borrowing through other financial platforms to lease Uber-standard cars.

Private taxi drivers also sold their cars to buy Uber-compliant vehicles.

“There was a time when we only sold cars to Uber drivers or people who did business with Uber,” said Raymondu Gitau, manager at Bolpak Trading Co., a Mombasa dealer.

Gitau has been working in car dealerships for 20 years. His assessment is that drivers may be able to pay their bills while driving for Uber, but that they “do nothing”.

Drivers say that in addition to the car itself, they also pay for their public vehicle identification documents, police clearance certificates, Uber training fees – which Uber calls background check fees – insurance, and auto inspections. All annual expenses (with the exception of the one-time fee to check the background), in addition to maintenance, fuel costs, the data plan for phones, and regular car washes, all count towards the bottom line.

Drivers polled unanimously said they did not fully understand what they signed up for when they agreed to partner with Uber and that at the end of the agreement they just checked the box.

Uber driver Emmanuel Bitok, one of 80+ drivers who spoke to NBC News, confirmed the safety requirements for the Uber app on October 16 before heading out.for NBC News / NicholeSobecki / VII

Uber says training will be held as part of the onboarding process to ensure drivers actually understand the terms and conditions.

Suiyanka Lempaa, an attorney and human rights attorney at the Katiba Institute, an organization promoting understanding of the Kenyan constitution, said the Uber treaty appeared to contravene a right to “equality of arms”.

For example, Lempaa said, Uber can terminate contracts at its discretion and without notice. The power violates the constitution, which gives the weaker party in such an agreement the right to immediately challenge the lawsuit under “procedural” terms, he said.

Onduru, the Uber spokesperson, said, “In order to work with Uber, drivers are asked to review and agree to Uber’s Terms and Conditions.”

She said Uber had nothing to say about Lempaa’s allegations about the constitutionality of the treaty.

Work harder, earn less

In May 2016, Uber launched its first loan program with Sidian Bank, a commercial bank in Kenya. The loans were for Zohari Leasing cars. The company was formed a month before the loan partnership was announced.

The hammer blow for many drivers came two months later, in July 2016.

After other digital taxi apps were rolled out in Nairobi, Uber cut its prices by about 35 percent. Drivers who took out loans that earned 60 shillings an hour were particularly annoyed. They earned a third less than expected.

Protests broke out and hundreds went on strike and refused to turn on the app.

At times, Uber pacified drivers with bonus opportunities and temporary hourly guarantees if drivers did not meet minimum thresholds. The company promised drivers that they would make the same money – or possibly even more – because the demand would increase. And Uber said if they didn’t it would make up the difference temporarily.

While the price changes resulted in an increase in rides, drivers worked harder and, for the most part, earned less, said Alissa Orlando, who took over management of Uber in East Africa in August 2016 and has since left the company.

In addition, Uber has taken more drivers on board than ever before, which means there is more competition for rides.

Uber’s business model evaluates high rates of driver / driver transactions to increase the company’s overall rating by saturating the markets with Uber, Orlando said.

The company is not built to make money driving. it is being built, claims Huber Horan, a transportation expert in an article from 2019 in American Affairs magazine, “to eliminate any significant competition and then take advantage of this quasi-monopoly power.”

That meant attracting drivers and cutting costs – an unsustainable structure for workers, she said.

“Every week the sub-Saharan team had a call to check the numbers on the key performance indicator (KPI) tracker,” Orlando said. “The most important measure of a city’s growth and success was the number of trips versus revenue or profit. So there was every incentive to keep prices as low as possible.”

Rhayan Kanyandong (left), Patrick Ombongiga, Wycliffe Alutalala and David Mutera meet daily in a Nairobi café to discuss their work with the Digital Partners Society, a community organization that represents drivers and vehicle owners on industry regulation issues. Nichole Sobecki / for NBC News

In an email, Uber said a number of factors are considered when measuring success and that drivers “are at the heart of the Uber experience”.

But the model as described by Orlando meant misery to many who had believed that driving for Uber would enable them to make a living.

It was Orlando’s job as operations manager to model what price cuts would mean for driver profits. She said her models showed that the drivers did not earn a living wage and, in some cases, even lost money.

Orlando said that the general manager, Loic Amada, and Cornelius Schmahl, then the central operations manager, were both pressuring them to “underestimate the cost and exaggerate a driver’s potential load”.

Orlando suspected it was their job to make the premise look better than the reality, though it has never been said so bluntly.

Schmahl declined to comment on the recording.

NBC News sent an email to Amada’s personal address. Amada declined to answer questions and instead referred the questions to the Uber spokesman.

Uber said it is closely examining its business model and regularly monitoring tariffs in the 600+ cities in which it operates, and that those models have been “tried and tested”.

A few months after her brief stint at Uber, Orlando was studying pricing models. Amada, the general manager, told her to assume the base price of a car was $ 3,000, she said. Amada said he was leaning on a sign he saw in a mall. However, cars that meet Uber’s standards typically cost around $ 7,000. And Uber’s partnership with Sidian Bank only financed vehicles worth around $ 15,000.

Estimating the cost of a car at a fraction of its real price gave a misleading picture of potential revenue, resulting in “an insincere tactic … to artificially justify an unsustainable price,” Orlando said. This particular model was not used, but Orlando claimed it was an example of the company’s practice of being bluntly misled about the actual price of the operation. You raised the problem at your own risk. “I have been told by several people, particularly from the Johannesburg office, that advocating drivers would affect my career and my progress within the company,” she said.

Disaffected, Orlando left the company after seven months. She is now founding a ride-sharing cooperative.

The impact of Uber’s pricing models had an impact on the country’s economy.

Hamza Tufail, the owner of Nobel Motors, a car dealership in Mombasa, said people got into trouble renting or buying cars just to drive for Uber. While his sales doubled thanks to Uber, so did withdrawals, he said.

Sometimes drivers come to him crying, he said.

One driver who took back his car but is now driving another vehicle for Uber called the day his car was taken “the worst day of my life”.

In March 2017, Uber raised interest rates by around 20 percent after driver strikes. Now the drivers were making about 40 shillings (40 cents) per kilometer. But at that point there were a lot more cars on the road.

And the worst was yet to come.

“It collects, collects, collects”

In 2018, Uber launched a new category of cars. The ChapChap is a Suzuki Alto, a smaller two-door ride that costs less than the cars thousands of drivers previously leased, rented or bought to meet the Uber standard.

ChapChap trips were rated accordingly, from only 16 schillings per kilometer. Kenyans would band together to take a ChapChap and say it was almost as cheap as a Matatu, one of the unreliable dilapidated vans that serve as the national public transportation system.

ChapChaps could be financed through the Stanbic Bank. That put even more drivers on the road and brought other Uber-specific cars into the more expensive sector.

An Uber driver in Nairobi, Kenya, gets ready to step out of the car wash last month, where he parks his vehicle every evening and starts his work day.Nichole Sobecki / for NBC News

A banker at Sidian, who offered the original loans through Uber, said car repossessions had increased as increased competition meant that drivers who leased through Sidian had fewer customers. “It collects, collects, collects,” said the banker.

In a direct response on Twitter, the bank said the program with Uber was no longer active.

NBC News sent a “Contact Us” email for Stanbic Bank and went to the bank in person, but received no official comment.

Uber has launched a ChapChap promotion for drivers: after completing 15 trips a week, the Uber commission would change from 25 percent to 3 percent. That helped some to repay the Stanbic loans. One driver called the promotion “brilliant”. But national media have reported high take-back rates Following the ChapChap model and when the pandemic hit, Uber finished the doctorate.

When he worked harder and harder just to step on water due to price drops, Munala was trapped. By the end of his time with Uber, around March, he would start driving early in the morning to earn enough to buy breakfast for his family.

Then came the coronavirus. The licenses he needed to run the company expired the week the land was locked. He didn’t have enough money to renew his papers after the offices reopened. Munala was evicted from his home in August and was living in his church. He got a cough that weighed on his already fragile stomach. It took him weeks to raise the money for the surgery to repair a scar.

Since it can no longer drive, the Toyota Passo is rented out. He uses the money he collects to pay off his debts.

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