Different responses to Uber – South Africa

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Entry of the mobile technology ride-sharing service, Uber, into passenger transport markets across the world has brought disruptive competition with substantial benefits to consumers. Africa is no exception.
Uber is currently the dominant ride-sharing app used in Africa. It has rapidly grown its African footprint and now has operations in eight countries; Egypt, Ghana, Kenya, Morocco, Nigeria, South Africa, Uganda and Tanzania.

Disruptive competition through technology can bring substantial benefits to consumers, but it also raises competition and socio-economic issues. These result mainly from the displacement of traditional service providers. These issues cannot be ignored in a developing country. Regulation needs to at least ensure that conditions for competition are consistent and not only free but fair across competing services where possible.

There are also concerns that Uber, with its first mover advantage within the ride-sharing market, is growing into a monopoly despite the benefits to consumers.

These concerns have been raised by incumbent taxi operators in South Africa. As is the case across the globe traditional metered taxis are seeing red. In South Africa, traditional metered taxi operators have protested and also tried, so far unsuccessfully, to get the competition authority to prosecute Uber for what they see as anti-competitive behavior and there have been attacks on Uber drivers by business rivals.

But there are also signs of a rising challenge to Uber by new rivals. The South African experiences is worth noting.

In South Africa new entrants into the ride-sharing app market have made little progress in attracting substantial demand. These include:

• Taxify which entered the market in 2015. It struggled and had to re-launch its brand with a new business model in 2016 to access a wider market, in which it now holds around a 10% share. Its strategy is based on 15% lower prices and higher proportional pay out to drivers.

• Zebra Cabs, an incumbent metered taxi company, adopted the electronic taxi hailing technology to launch the Zebra Cabs app in 2016, a direct rival to Uber.

• Jozibear entered the market late in 2016 and currently operates in Johannesburg, Cape Town and Durban.

But Uber has built a strong brand among local customers since entry in 2013, in a market with important first mover advantages.
Even though competitors may offer better quality or cheaper services, customers will be attracted to Uber’s because it has established a stronger brand and larger driver network. To compete, entrants have to develop rival platforms which are frictionless and able to attract both drivers and passengers.

Changes in regulation to encompass ride-sharing have formalised aspects of the industry in South Africa. These include licensing and permit conditions. But these changes have not necessarily led to a stronger competitive position for rivals, including metered taxis.
Who will win the market in the region is now anyone’s guess.

Uber’s position in South Africa looks more assured. But it does face challenges. Ongoing protests, the most recent of which led to gridlock near the country’s largest international airport, could lead to continued scrutiny of its operations.

And the company has had to adjust its model to suit local conditions. Uber grew rapidly when it first launched using its standard transacting mechanisms due in part to the fact that in 2015 54.9% of South Africans had credit cards. But it has had to reconsider its banking card only payment mechanism and now allows cash payments.

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