On Thursday April 14, 2022, Tanzanian Uber users were a bit shocked by a statement from the operator that they have suspended services for Uber X, XL, and X Saver respectively citing an unfriendly business environment caused by the sectoral regulations currently in force.
“We have made the difficult decision to suspend our services UberX, UberXL and UberX Saver in Tanzania from Thursday 14 April 2022. Current regulations in the transportation sector have created an environment that is not friendly and has presented a significant challenge in our business operation.”, reads part of the statement from Uber
The unprecedented voluntary cease of business specifically pointing to regulatory challenges follows a few months after the regulator had suspended Linkee, another operator for lack of licenses to operate.
How It Happened
Uber has told Tech Crunch magazine that the main reason for the suspension of their services in Tanzania is the commission set by the regulator of which Uber has attempted to have it reviewed unsuccessfully.
In Tanzania, the Land Transport Regulatory Authority (LATRA) is the Agency responsible for the land transport sector which covers road, rail and cable transport. Before the establishment of LATRA in 2019, the responsible authority for the regulations of the ride hailing taxi cab services like Ping, Uber, Little ride and Bolt was the local government authority.
LATRA was mandated to regulate the sector via section 19 of the LATRA Act 2019. As a part of its regulatory mandate LATRA was empowered to review and set fares and each ride hailing service provider is required to have a “fare meter” an electronic instrument that records and displays trip information including fares or hiring charges which has to be approved by LATRA.
As part of its mandate on March 14, 2022, LATRA released a fare setting order for ride-hailing services, Order No. LATRA/01/2022. The Order, which platform owners have refused to comply stipulates ride-hailing fare per km to the tune of Tsh 900 and Tshs 100 per minute. The minimum fare is set to be Tshs. 3000, while the approved maximum commission for platform owners is 15%.
The fare setting above seems to be a reason as to why some of the operators were not able to comply given the fact that before LATRA order most operators were charging commissions between 20% for Bolt and Uber is charging 25%.
Another conflicting issue is on the minimum fare of Tsh 3000 which is contrary to operators pricings categories such as Uber minimum prices of Tshs 2000,3000,5000 for Uber Poa, X and XL respectively.
Because of the non-compliance, LATRA issued a compliance order giving the respective ride-hailing services seven days to respond. According to the regulation, this is the required procedure for suspension or revocation of license.
Subsequently, on April 12, 2022, a group of service operators marched to the LATRA offices demanding the authority to ensure the rest of the ride-hailing service providers are adhering to the price-setting order. Following their engagement, LATRA released a statement highlighting that service operators were pressuring the authority to suspend the licenses of the given ride-hailing services.
Bad timing
Price setting order came out at a very critical time of fuel price volatility which has been hugely impacted by the Ukraine Russia war. Fuel price is a very important aspect in this type of business. It is obvious that the intentions of the regulator might have been genuine which are to protect the parties concerned.
But to operators, this might also feel unfair in one way or the other as the pricing aspect is what makes this business succeed. Unlike other regulated services, where you only have service providers and consumers. Ride-hailing entanglement has brought three parties, operators, service providers, and consumers of which everyone needs to protect their interests and LATRA is the one to make sure there’s a balance of interests.
This is the reason you may find that in pricing users need affordable prices, riders need to get good earnings, and platform owners need a good commission as well. The regulations and subsequent orders have to be thoroughly checked in collaboration with the services providers and other stakeholders from other related sectors so as to balance the tripartite interests which the regulator is intending to act on.
LATRA Legal Mandate
Although According to LATRA the above price setting order followed a stakeholder meeting conducted on 21 December 2021 to hear their comments on the review, regulation 13 of THE LAND TRANSPORT REGULATORY AUTHORITY (TARIFF) REGULATIONS, 2020 gives unfettered powers to the regulator.
According to this provision LATRA, on its own motion can initiate an inquiry to review a tariff of any service provider where- (a) there are changes in the circumstances that require tariff adjustment; (b) tariff charged by a service provider was not approved by the Authority; (c) the applicable assumptions used to calculate the tariff have significantly changed, (d) the service provider has failed to submit tariff review application to the Authority within the prescribed time.
According to the same rule LATRA when exercising its power to review tariffs on its own motion it may require the service provider to submit any necessary information within a specified time and when the service provider fails without reasonable cause to submit the requested information within the time specified they are mandated to terminate the tariff review process.
You might have noted that the wording of this provision gives to too much powers to the regulator. Even though services regulations are very important for consumer protection and the likes, one might say this regulation unintentionally inhibits investor-friendly environment and sometimes limits innovations like offers and discounts which are mainly business strategies.
The other thing is a thorough review of other cumbersome conditions and requirements which make business environment even harder. A good thing about rules, regulations, and orders can always be changed, it is never too late.
Emmanuel Mwesiga is experienced in commercial and corporate law transactions and advisory. He can be reached through e.mwesiga@yahoo.com or follow him on Twitter at @EsquireMK. Want to publish in this space? Contact our editors at editor@thechanzo.com for further inquiries.
