BUSINESS LAW UPDATE: THE BUSINESS AND REGULATORY ENVIRONMENT FOR RIDE-HAILING TAXI SERVICES IN TANZANIA

• Defining ride-hailing services
• Ride-hailing taxi services platforms in Tanzania
• Regulatory framework for ride-hailing taxi services in Tanzania
• The business environment for ride-hailing taxi services in Tanzania
• Prices and price control mechanisms
• Comparison with other East African Countries

1.0 Introduction

The 2000s have experienced a number of technological advancements in transport and communication to the extent that technology has become a vital part in transportation services. It is during this time when Ride-Hailing Taxi Services have become popular. Ride-hailing is an activity that involves a customer requesting a personal driver with a customized ride to take them wherever they need to go. This is usually done online through a mobile/computer application. Recently, Tanzanian citizens especially big cities dwellers i.e Dar es Salaam, Arusha, and Mwanza have experienced a growth in ride-hailing services from a number of both local and foreign companies such as Uber, Bolt, In-Driver, and Ping providing ride-hailing services digitally.

Ride-hailing services in Tanzania are regulated by a government regulatory authority known as the Land Transport Regulatory Authority (LATRA) established under section 4 of the Land Transport Regulatory Authority Act No. 3 of 2019. LATRA was established to regulate the land transportation activities in the country such as transportation of goods and passengers; railways, and cable transport; to regulate transportation charges and rates; to issue, renew and cancel permits or licenses; and to coordinate land transport safety activities, just to name a few.

Due to the increased use of ride-hailing services especially in big cities, the government designated LATRA to oversee and regulate the same.

Our Corporate Commercial Department at Breakthrough Attorneys has prepared this Article highlighting the regulatory and business environment for ride-hailing services in Tanzania.

2.0 Regulatory control for ride-hailing taxi services in Tanzania

Like any other business or service, ride-hailing services have developed in the country due to various factors the most important being the regulatory framework. Equally, the law and the institutions may weaken the development of ride-hailing services in Tanzania.

1. The Land Transport Regulatory Authority (LATRA)
   As hereinabove mentioned, LATRA is a government regulatory authority responsible for regulating land transport in the country including ride-hailing taxi services. Before the establishment of LATRA, the Local Government Authorities administered the ride-hailing taxi services providers in the same way as normal commercial vehicle hire services (taxis), there were no designated mechanisms to regulate ride-hailing services.The establishment of LATRA in 2019 brought new regulatory changes for the ride-hailing taxi service such as the review and setting of rates and charges for all regulated sectors under the Act. Therefore, from its establishment up to date LATRA is the sole regulatory authority responsible for ride-hailing taxi services in Tanzania.
2. Order No. LATRA/01/2022
   As hereinabove mentioned, LATRA is a government regulatory authority responsible for regulating land transport in the country including ride-hailing taxi services. Before the establishment of LATRA, the Local Government Authorities administered the ride-hailing taxi services providers in the same way as normal commercial vehicle hire services (taxis), there were no designated mechanisms to regulate ride-hailing services.The establishment of LATRA in 2019 brought new regulatory changes for the ride-hailing taxi service such as the review and setting of rates and charges for all regulated sectors under the Act. Therefore, from its establishment up to date LATRA is the sole regulatory authority responsible for ride-hailing taxi services in Tanzania.

3.0 The business Environment for Ride-Hailing taxi services in Tanzania

The ride-hailing taxi services in the country have experienced a conducive environment to conduct the said business whereas, the response from its stakeholders has increased openness and penetration of the market. This is evident due to the number of companies that engage in the taxi-hailing taxi services in Tanzania. Currently, there are over ten ride-hailing taxi services platforms in the country such as Taxify, Ping, Bolt Tanzania, In-Driver, Paisha, and Uber just to mention a few.

The market is generally dominated by the three big companies namely Uber, Bolt, and In-drive each of which has dominated its own market. Uber operates only in Dar es Salaam and has a large number of users than others, Bolt operates in Arusha, Mwanza, and Dar es Salaam whereas a large number of its users are in Mwanza and Dar es Salaam. On the other hand, In-Drive enjoys a dominant position in Arusha.

There may be a legitimate fear due to the trend that one or two companies have created a monopoly environment which puts them in the upper hand when it comes to setting commissions to the extent that consumers and service providers are left with almost zero chance to choose otherwise. This is a situation that is available in other markets, what is important is to ensure local companies which are mostly startups are able to compete. Tax incentives for example would place local companies at a competitive advantage even without disrupting the market.

The following are the movers of the market as it is today;

1. Pricing and Price control mechanism
   Before the issuance of the Order by LATRA, companies enjoyed the freedom to set their own commission by agreeing with drivers. This allowed them to set competitive commissions up to twenty-five percent (25%) and lower prices to TZS 2000. As hereinabove mentioned, LATRA conducted a review of the rates and charges applicable to the ride-hailing taxi services whereby through Order No. LATRA/01/2022 there was introduced new price control for these services.The Order provides that the approved minimum fare is TZS 3,000.00 and the Approved maximum Commission for the platform owners is 15%. Also, the ride-hailing fare per km is TZS 900.00 and per Minute is TZS 100.00Ride-hailing service providers have shown their disagreement with the Order in different ways. For instance, on 14^th April 2022. Uber, announced to suspend some of its ride choices in Tanzania due to the difficult business environment that faces it that has been charged by the regulatory changes.

   In our view, it is important that any attempt to regulate prices should not affect the fundamental realities that ride-hailing bring to the transportation market namely; lower transaction costs, and easy availability of services. When major players such as Uber leave or reduce their presence in the market non-competitive outcomes should be expected.

2. The Land Transport Regulatory Authority Legal Mandate.
   Regulation 13 of the Land Transport Regulatory Authority (Tariff) Regulations, 2020 gives a mandate to LATRA on its own motion to initiate a review of a tariff on any service provider where there appears to be changes in circumstances that require tariff adjustment; and/or the tariff charged by a service provider was not approved by the Authority.In the light of the above provision of the regulation as well as section 19 of the LATRA Act, it goes without saying that the authority has been given high powers in the regulation of the land transport service providers. It is important to note that such provision may be a way to ensure consumer protection and safeguard competition laws but on the other hand, may be considered unfriendly to the business environment as evident with Uber.Breakthrough Attorneys understands that the issuance of standard rates was done to protect local drivers and consumers from any unfair prices by ride-hailing technology companies. However, it is important that pricing is left to be decided by demand and supply forces in the market considering the demand for these services, and the ease of access it provides to urban dwellers.

   LATRA may regulate the minimum fare but not decide on every small aspect affecting prices which is likely to affect competition in the market.

4.0 Ride-Hailing Taxi Services in other East African Countries

East African countries such as Kenya, also experience ride-hailing taxi services which have provided much aid in land transportation in the country. Kenya has a platform of ride-hailing taxi services such as Bolt, Wasili, Little Cab, In- Driver, and Hava. Land transportation is regulated by the National Transport and Safety Agency (NCSA).

Regulations for ride-hailing services in Kenya are somewhat similar to those in Tanzania to the extent that, the approved maximum commission to the platform is 15%. However, there are no regulations put in place to regulate the rates and charges in terms of prices per distance and time. Perhaps, this may be the reason why there are no threats of companies suspending their services in Kenya due to the fact that it leaves room for flexibility in terms of pricing and enhances competition.

Therefore, it may be safe to say that due to the changes that are yet to be implemented by the government of Kenya in terms of the draft regulations being passed as law, the business environment there remains friendly and considerate for the ride hailing services. This may be the case since from recent events, one big provider of ride-hailing services has reported only suspending of its operation in Tanzania but not in Kenya or the whole of East Africa.

5.0 Conclusion

Ride-hailing taxi services have proven to be of much help to Tanzanian citizens to cater to transport needs. These services not only save money but also save time by reducing time spent in traffic queues. The recent change in the land transport sector may have spiked concern among many service providers but there is still hope for Tanzanians due to a number of platforms that still operate. This may also be an opportunity for competition for the local companies to improve services, penetrate the even larger market and position themselves for competition against international companies.

Further, Breakthrough Attorneys is of the view that the government should mark this as an opportunity to better the business environment in Tanzania in order to support service providers that offer alternative employment to a large number of youths in the country but also solve problems that many citizens face. We agree that due to their nature ride-hailing services pose other regulatory challenges such as consumer protection, monitoring of payable tax, and proper parties to pay tax. However, an attempt should be made to maintain the advantages that come with ride-hailing service while ensuring that the government is able to collect revenues and regulate the consumer protection aspect without disrupting how the market operates.

 

Important Notice:

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, Breakthrough Attorneys, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.