Is Uber profitable in South Africa?

uber1bDon’t get me wrong, I love Uber, at first I believed it was amongst the greatest innovations within the 21st century amongst Facebook and Twitter until I was waiting on the street on a rainy night (courtesy of cyclone Dineo) and all I seemed to get from Uber drivers allocated to me was, sorry your driver had to cancel.

Four drivers had cancelled, humiliatingly so as I had gone on and on to my colleagues bragging about the service and low cost Uber offered as compared to dodgy security details patrolling the night that charge them 20-30 rand each for a trip or the conventional taxi drivers who charge 100 – 200 rand over the same distances. I was simply running out of answers to where my ride was as my initial 14 minutes ETA had flown past with no car in sight. The last driver to decline was kind enough (or not) to call and tell me to make other plans as it did not make “money sense” to drive 15 minutes for a journey of five and as much as I wanted to show Uber’s effectiveness and style to my colleagues, I had to agree. For the first time in my lovely relationship with Uber, I saw her other side. My five minute ride didn’t matter but the driver’s 15 did.

 

The rain poured down heavily and with no other choice I went along with friends to ask patrolling security detail at a nearby garage to take me home. Within a few seconds of arriving, one determined Uber driver who had eventually accepted my trip, called to ask for my whereabouts. In my apparent demise, I had packed my phone in a dry pocket and proceeded to the garage when he decided to come fetch me. Initially the ride was supposed to have been far cheaper as we where going to take the same taxi and split the charge but now because my other friends had already made other plans, I had to cough up the fare alone, as such because I loved their service before then, feared to have to pay for a ride which I did not cancel.

 

As usual my ride was nice, the car was smart and smelled nice, my driver even hard the car warm and stirred up conversations that have become synonymous with my every ride. Because the service is relatively new in South Africa and nothing like it, I still have a lot of questions on how it operates and it is like getting it from the horse’s mouth.

 

John (not his real name) was kind enough to explain to me as to the reason why there seemed to be no car available to me when I requested. It is in the way the service operates that might leave you wondering if the business owners of such a huge company are making any money at the end of the day. John told me how he has to wait for hours at the airport in a queue from Uber until eventually he is allocated a passenger. The queue he says can last for hours until eventually getting a passenger who could be going as far as the next city. All fair and done, the customer will pay for the ride but the driver will have to travel back again to the same airport for a fee that reflects only the passengers destination and not the cost to come back and also minus the service fees that Uber takes from the driver.

 

And as for when he picked me up, he was just from dropping a passenger on his way back to yet another queue when he decided to accept my ride.

 

It took him about 14 minutes to get to where I was, I am guessing there where no other Uber taxis in the area at that moment. It then took us 5 minutes to get home, a ride, which cost 35 rands. I honestly felt bad having to pay him such little money but because I have little in depth understanding of how he is making his money, the little conversation we had was enough to let me know that on this particular trip, the poor fellow came out with nothing.

 

“We as passengers can sometimes benefit from Uber, but we can’t always rely on it.  It is worth considering, while enjoying an Uber ride – what would happen if Uber effectively put regular taxi services out of business?  What would happen if we got a ‘no cars available’ message and had no other alternatives to turn to

Maybe Uber will grow to ‘meet the market’.  But if it is losing money at present, is more growth going to cause it to lose money faster or to stop losing money and turn profitable?  More to the point, is there an unlimited supply of potential drivers that Uber can add to its driver base?

The answer to the question about driver supply is key.  That very low fare you just paid to an Uber driver may or may not be sufficient for the driver to stay in business.  Remember that Uber takes 20% – 30% of the fare you pay for its role in the middle, and all of a sudden, a R30.00 Uber fare means a net of perhaps R24.00 for the driver, who then has to pay all his own costs and also self-employment taxes on whatever slim ‘profit’ may remain.” MiscellaneousReviewsTravel

 

Uber’s business models centres on being cheap and now that we have shunned conventional taxis who in turn are feeling the competition and leaving for home in the early hours of the night, we seem to be stuck with a service that might not have enough drivers to come to your aid or unwilling to come through because it does not make profitable sense. The flip side of this dilemna is knowing a colleague who is still waiting to have his Uber permit approved so he can start offering rides.

Uber is a great service, but before many South Africans get vehicle credit to put up a fleet on the streets of Johannesburg in the hope of making a kill, they need to come up with a driver base large enough to put out all the fears of being stuck on the road with no driver willing to accept your ride, no matter how insignificant it might be to the business.

 

 

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s