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THE BITTER REALITY OF INVESTING IN A MATATU.

28 Sep

When you have your priorities right or so you assume, you most likely have a positive approach toward what you want to achieve. Most of the times, we give all we got including attaining the necessary knowledge to facilitate all the right processes. Often times, the input we bring into the subject issue is everything we have and own in terms of the risks involved if the investment fails to reward.

Thousands of individual Kenyans have invested billions of shillings in what I can only call helping the government move people and keep the economy moving. Matatu investors pay billions yearly, though taxes ,fees, penalties, fines, licenses and bails deposit. Matatu industry [which comprises of 14 seaters, 9 seaters long distance shuttles, minibuses and buses with up to 51 seaters capacity] is responsible for providing upto 80% of public transport across the country. Nairobi alone is served by 60,000 plus matatus on daily basis.

Being an informal sector and yet so important for the economy of the country, the industry is therefore integral to the government and should be facilitated and guided by the laws and more so, sound and realist regulations that are open to amendments. Sadly, this is not the case.

Governments after governments comes and goes ‘since independence’ but instead of improving public transportation and investing toward making it sustainable, all the past regimes and so far the current one have continued charging services fees and taxes but not offering relevant services and facilities to enhance conducive environment to conduct the business.
For a single ordinary matatu to be on the road, the investor first buys the car from the dealer. Costs depends on makes (model) type and capacity. A fully assembled 33 seater minibus costs from 5.1m to 7m here again, depending on make and extra accessories added to increase revenue collection, USPs [unique selling propositions].

That is the first step, from there, you pay the government.
Advance tax =
Vehicle registration fee =
Inspection booking fee=
Number plate fee=
Road service license fee=

It is then that the government releases the vehicle to the matatu Sacco. Here the vehicle owner pays registration fee or joining fee. This is between 20 thousands and 200 thousands depending on route. This is nonrefundable one-off charge although not regulated by the government, the fee is compulsory before putting a matatu on the road.

All matatu Sacco’s are privately owned and vehicle owners have little or no say in the running of the entities. The directors decide on how much you pay daily as services fee and operations costs. This again is not negotiable. Daily operations fee is from 300 kes to 1500 for some bus companies. The Sacco is required of by the regulating government authority to provide and pay a driver and a conductor for your matatu. But unfortunately, Most Sacco’s have not employed drivers, the owner here has to provide and pay his driver.
After you have your matatu and you are a Sacco member, there is more; it is mandatory to have insurance for every passenger on board. For 33 passengers the minimum for third party insurance is 17,000 kes, third party insurance is only an option where the buyer paid cash for the vehicle, where a financier/ lender is involved the insurance cover must be comprehensive thus costing twice as much.
Other renewable mandatory licenses include county government’s parking fees which goes for 5000 and above depending on number of counties along your route. The more counties you need to stop, the more you pay.
Workers salaries can be paid on daily basis or monthly. The salaries range from 45,000 for a driver and 30,000 for conductor when paid monthly.
After fulfilling all the above requirements, the matatu owner hands over the matatu to the crew [driver and conductor]. The rules of engagements are simple and just like the way the entire informal sector operates, UNOFFICIAL/ off the records. =
The driver will operate your vehicle on the authorized route for certain duration of time everyday.
The crew will collect all the money and give the owner the agreed upon daily target.
The rest of the money goes toward; fueling the vehicle, paying protection fee and route managers [cartels] salaries.

Then there is the police to the equation;
It is estimated that one matatu pays an average of 2000 Kenya shillings corruption money, to the police every day. The loophole which the law enforcers use to mint all this money is created by the National government failure to provide enough facilities like bus stops and bus stations. Most of this Matatu routes don’t have picking and dropping areas thus, drivers have to find alternative loading and offloading places at the mercy of the police officers since its illegal. The court fine for dropping or picking passengers at undesignated areas is 10,000 shillings. When caught, Most drivers prefer to settle out of court with the arresting officer for lesser penalty

Passengers transportation market is very unpredictable, there is no day like the other, thus the income is not consistent despite setting the target. Many are the times that the target is not met. On paper and proposals, it might look viable and lucrative but on the ground- hundreds if not thousands of investors are straggling to salvage their capital and pay back loans. Hundreds have had their vehicles auctioned including whatever property they had put as collateral. Matatu investment is like gambling- and every investor must know the secret to survival, know when to walk away and when to run.
CASE STUDY.
Barely a year ago an investor from This town decided to try his lack in the matatu business. He did his research and identified a brand new ISUZU as his vehicle to carry his dream of owning a fleet of matatus operating in the capital Nairobi. He followed the due process of owning a matatu by firstly buying a chasis from General Motors, It took five months from the day he paid the deposit to the day the matatu came to the road. And indeed, it was a beautiful piece of art. SPANKING purple custom build minbus. By looking at the final product, the 7million Kenya shillings he had put in to it was worth every penny.
The owner had done his homework well and invested heavy toward capturing his desired target group; mostly the youth and college students. Nicely crafted body shape, high-tech inbuilt entertainment package, mega screens, free WI-FI, Special seats and CCTV monitor.
He joined a matatu Sacco that operates along Langata road that serve students of four University institutions. Catholic University, Nazarene University and multi Media University. Initially this had been his desired route of operation and the main reason he had built a matatu most appealing to the young generation. Business started well and true to his estimates, he was able to make 14,000 shillings a day. He had been promised 15k but he was okay with the returns.
The good cash flow did not last long, although the matatu was working daily, the savings didn’t not reflect the same. There was always a reason for all missed targets.
DRIVER: Buyu tume-umwa na Gava, wanadai hi gari iko na ngoma excess, lakini ni lugha tu, ni sababu gari ni mpya na bado hawaja ilaba…
OWNER: Si gari imetoka inspection juzi?- Tena sasa music ni loud? Kwani na nyinyi munafungulia load music tao?
DRIVER: sio hivo buyu, ametukuta pale Agip tukibemba. Ata huyu karao ako hapa ongea na yeye.
COP. Wewe mzee hi gari yako inaenda dani.. umeweka ma-horni za kufukuza wanyama, ma-speaker Kila mahali na muffler. Kwanza hii inaenda kortini direct.
OWNER. SIO Hivo mkubwa, nimesangaa kwani vijana wamefanya Nini..saidia huyo sio kijana mbaya. Hizo vitu tutatoa. Wasaidie warudi kazi..
Twenty minutes later the owner gets a call.
DRIVER. hello buyu, tume-achiliwa, ametufikisa library akakula thao tatu. Lakini ni Hali ya job, tuta-recover boss. Wacha tuingie wira.
OWNER. Sawa, ni poa Kama mumeachiliwa. Nyinyi ruduni kazi mtafute pesa. Staki story jioni. Unasikia kamau???
DRIVER. usi-mind tutasaka doh. Alafu Buyu, Kuna vile hi ngoma iko na ma-short, nimepigia Elvo akam a checking ma-badaye..
That evening, the matatu did not bring home anything. Not because they had earlier been arrested, no, there was no money because after they were released, they decided to go to ngara to have the music checked. The technician ELVO had two other vehicles but they opted to wait.
DRIVER. BUyu leo hakuna vitu, tumeenda squad 3 tu. Zile mbili za asumbuhi alafu kukam hivi kutoka Ngara. Ile doh tilikua nayo tumejaza mafuta tukagawana Mia tano Mia tano.
OWNER. Bona hamukuniambia milienda garage? Kamau unasikwa na karao juu ya round music alafu Tena una kosa kwenda kazi ukatengenezewe hio hio music,?? Come-on!!!
DRIVER. BUyu sisi tiliona tusiside tukikusubua na ma-simu, bathi itengenezwe Mara moja kesho tuchangamkie wira roho juu. Leo ilikua siku ya ngaba!! Kazi tutafanya buyu. Lazima recovery hii week yote.
After that the calls kept on coming each with it’s own explanation.
Police
Kanjo
Accident
Operations
Court fines
Warrants

and many other unexplainable reasons. Each time costing thousands of shillings. After six months, the owner could not remember the last time he got the 14k target from the matatu.

One year down the line, the matatu started showing signs of wear and tear.. the color had started to fade and even the interior decorations had started falling out. It was time to refurbish. That meant another two months at the bodybuilder to remake the body. The cost was in hundreds of thousands.
As soon as he was back on the road, the matatu has a crush with the authority and his number plates were consificated. He was ordered to have his matatu re-inspected even though it was barely a month since going through the same inspection for the annual sticker. The re-inspection took two weeks and 60,000 shillings to get the number plates back.

A month after getting the number plates back, his matatu was on 9 o’clock news. It was one of the vehicles that had been hired for a private road trip to Meru but instead of the convoy going straight to Mere, some of the matatus that had also been hired from other routes decide to do some funcy stunts in the CBD. The were put on the police wanted list for prosecution.

The Sacco grounded the and submitted his number plates and road service license to NTSA. It is not yet clear how long the vehicle will be grounded and how much it will cost to get his registration back but one thing is quite clear, his investment is not paying and if at all he has made any money, it is very little compared to the amount he invested and the returns he expected.
I don’t think it’s prudent to have the investor bare all the burden while he has a signed contract with a Sacco. I believe it is because of the government agency responsible for transport namely NTSA that has failed to cushion investors from exploitation from rogue Saccos and corrupt police. Let everyone follow the law. Matatu Sacco should employ drivers and take full responsibility for them when they break laws. The investor deserves compensation since it was the driver who could have violated the law if indeed the court finds him guilty.

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Posted by on September 28, 2018 in Matatu matters

 

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