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THE BITTER REALITY OF INVESTING IN A MATATU.

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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Cost of owning a 33 seater minibus in Nairobi.

MATATU INVESTMENT.
Matatu is a name associated with Kenya public transport sector referring mostly to the low capacity public service vehicles. Over the years, this sector has remained chaotic and mismanaged and many investors have kept a distance. But since public transport is more of a basic requirement, and people need to move from one point to another, the demand for public means of transport has continuously increased and provision of the same has remained one of the most rewarding investments in terms of returns to those already in the business.
WHICH MODEL IS THE BEST?

The Government has been in the process facing-out lower capacity public service vehicles {14 seater Vans} in all urban centers especially in the capital Nairobi- it has been a continuing program for the last Eight years- investors are now going for minibuses with a capacity of 33 and 47 seaters respectively.

Different vehicle Manufactures have come up with several models to fill the gap, ISUZU — MITSUBISH -TOYOTA DYNA — HINO — TATA — HYUDAI – Nissan UD {Swara} — FOTON etc.

ISUZU NQR remains the biggest contender in the minibus category especially the 25—29 and 33 seater capacity. General Motors the manufactures of Isuzu has been selling buses across the country for many years and their different modes have worked for Kenyan roads. The availability of genuine and affordable spare parts is also an added advantage to buyers.

Hino is making a grand comeback in the passengers transport services. SANYO DIGITAL CAMERAThe 33 seater Hino minibus is giving Isuzu quite a worthy challenge especially in the Manyanga {soaped up} category. With the fancy bodies, it is hard to tell the difference between an Isuzu and a Hino. Although there is still room for improvement, this model has most of the important features that are ideal for Matatu business.

CAPITAL,

To own either of the two popular minibuses, you need an estimated capital of 5 million Kenya shillings. You can pay cash or get finance through lenders either a bank or savings and credit cooperative societies.
For cash buyers- the requirements are as follows.
 Chassis/ cabin. =sh 3,502,000
 Manyanga body. = ksh.1.2 {depending in features}
 Registration number plate= ksh15, 000.
 Advance tax @ksh, 720 per seat= ksh 23,760.
 Comprehensive insurance cover = ksh 450,000.
 Music system advanced = ksh. 150,000.
 Sacco registration & tlb license.= ksh. 20,000.00
TOTA L. =Ksh. 5,360,760.

RETURNS
The fare from Rongai to Nairobi is 100 peaks and 50 off peaks- on average the minibus makes six return trips to and from Nairobi. The average income per trip is between 3300— 4000 shillings; for six return trips the crew will collect sh 19,800,00
 Fuel is equivalent to 1000 per return trip—in a day a total of Ksh 6,000 will go to fuel.
 Salaries for the driver and conductor rage between 3,000—- 4000 shillings depending on terms of employment.
 Other expenses are; parking
 car wash
 Sacco contribution-= 500— 1000. Depending on the sacco.
 On average a 33 seater manyanga makes a net income of between 9,000—10,000 per day i.e. after all expenses have been deducted from the gross income including fueling & salaries.
 Most drivers work six days a week and rest on Sunday on average the minibus works for 27 days in a month and makes 270,000.
Monthly expenses include INSURANCE, PARKING FEE and SERVICING.

DURABILITY.
A brand new minibus is more productive in the first three years- during that period it can maintain the target of 9000 Kenya shillings per day; but the income drops in the fourth year by slight margin- of between Ksh.7,000- 8,000. Despite the drop on returns this bus can and will give you service for a minimum 7 years.

MANAGEMENT.
A Matatu owner has the right to employ a trustee/ manager of his choice to run the daily affairs of the van; it is however recommended that investors seek the services of qualified managers/ management agencies. This helps in setting a target which is sustainable and eases the burden for the owner.
1. The agency maintains control and costs incurred by each of the managed vehicle and must record / report to the owner of any malfunction or mechanical problem noticed on any vehicle.
2. It is the duty of the fleet manager to see to it that a file is kept containing all documents related to each vehicle such as Accidents reports, insurance, repair charts, and road licenses.

SURVIVAL IN THIS BUSINESS
For those who want to go it alone, there is of-cause the protection fee. This last bit is necessitated by corruption in the traffic department. It would be unwise not to have a contact person at the police station especially those that man your route of operation. It is hard to survive in this business however you may hate corruption; even when your Matatu has complied with all government requirements. The traffic police department is the regulator and most of them see the industry as their cash cow; there are police officers who will look for reasons or even obscure offense and place it on your crew and this will cost you dearly. It is therefore important to bear in mind that they also have a share of your cake and this might have a very significant role in the success or failure of your investment.
For more information.. wambururu@gmail.com
To book an appointment call: +254 724 384 676

 
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Posted by on December 8, 2015 in Its life, matatu investment, Matatu matters

 

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Bring Back “NYAYO BUSES’

The Matatu industry has for many years been associated with road accidents, recklessness-corruption and lawlessness. It is an industry that is most citied for lack of management and no procedures. These include no schedules, poor working conditions for workers, fluctuating fares, undesignated stops, cartels, and harassment.
Despite all this, Matatu industry is a major Economy booster; creating direct and indirect employment to thousands of diverse vehicle owners, Matatu Saccos, management companies, drivers, touts, route managers, mechanic; and a source of livelihood and investment opportunity for hundreds of Kenyans working in insurance companies, Tracking Companies and spare parts dealers among others.
Today we have a more improved road network. The demand for transport has increased tremendously with mass movement to urban areas. But the current state of transport system in Kenya is still wanting;
• What is lacking ?
What we are yet to see is the GoK coming in as investors; owning and operating public service transport. It is very possible. The idea was tested During the Nyayo Era- Earlier in late 80’s {1988 to be precise.} President Moi in an effort to create cheaper alternative for the commuting population started a state owned bus service (Nyayo Bus Service Corporation). Under the umbrella of the National Youth Service {currently led by CS for Devolution} the Government of the day imported buses from Italy and Belgium and in under a year they were controlling a fleet of over 300 buses Serving in most of the city routes. This venture went down; not because it wasn’t resourceful, but because of mismanagement and corruption.
What the National government can do to tame the market is bring in state owned buses”. They will Charge lower fares than the competitors and still make lots of profit, because (1) they {NYS} have subsidies in fuel and (2) they can easily import spare parts for the buses in an environment of foreign exchange restrictions. (3) they have availability of manpower; drivers and conductors will be sourced from the institution at no extra expense. And (3) All the buses will operate on NYS logo and this will mean more disciplined/ trained PSV operators. Since it will be run by a government institution we are likely to see an end to corruption on the road.
An estimated 70% or more of the Kenyan work force live in the outskirts of the capital and use public service vehicles to go to work and vice versa. These include colleges and universities students {since most of these learning institutions are located in the cities or have branches in the capital.} Also majority of small scale traders buy their merchandise in the capital and sell in rural areas. Farmers too rely on public transport to get their produce to the market. The only available alternative means of public transport is Motor cycles, salon cars /taxi, and bicycles which takes care of only a small percent leaving most of the passengers to the matatus.

The current transport market is still dominated by 14 seater vans. Although there has not been any new 14 seater licensed for town service in the last 8 years since the Government restricted licensing; Many of those that were licensed in that year going back are still in operation. The average Matatu is 8—9yrs old. {This is not the year of manufacture since most of these vehicles are second hand imported from Dubai and Japan.}
Most of the 33 seater minibuses are newer; but they are mostly on town service routes. We have some routes that have brand new vehicles registered as early as this year. In most urban town centers we have new and locally assembled Matatu joining the industry; there are those that are fitted with spacious seats, powerful music systems, CCTVand wi-fi ; they are locally referred to as “manyanga”.
Passengers pay more for these new buses even when the cheaper ones are available. Newer buses are modern, which means they are more advanced in-terms of comfort, speed and safety.

Recent changes in government institutions that engage with operators in the Matatu sector has brought about renewed hope of finding a lasting solution to the public transport problem that is common in most urban towns in Kenya. By bringing together various government institutions under the National Transport and Safety Authority {NTSA}, the Government intended to make it easier to monitor and regulate public transport in the country.
The fragmentation that existed before, did not allow room for accountability. Thus, creating points of collusion where individuals who are employed by the regulatory agencies {especially police officers} joined the industry and own vehicles, which operate at an advantage. This is what causes tension among operators and increases the level of noncompliance to rules and regulations paving the way for lawlessness and corruption.

 

 
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Posted by on October 20, 2015 in Its life, Matatu matters

 

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THE JOUNEY TO OWNING A SECOND HAND MATATU IN KENYA.

Mrs. Brown is a Kenyan living and working in United Kingdom; she has plans to return home and settle here in the country sometimes in the near future. Despite owning a home here in the country, She feels the income she is getting from her rental houses in Nakuru is not enough to sustain her once she decides to come home. That’s where the idea of investing in the transport industry came to her mind.
She called our office around February and requested that i assist her in getting into the matatu business. she had made up her mind that she would try the transport sector. A week after she landed in the country, we began the search by visiting car bazaars to shopping for the right van. We sized quite a few, some good ones here and there, the price sounded right but they needed lots of paper work before the vans could be registered. There was not much time to go through all the process required for a matatu to get licensed by NTSA.

We opted to go for one already on the road. one advantage of buying a van already in the route is because It was easier to tell the condition of the vehicle and also what to expect based on what the owner is taking home. Another advantage  was the fact that the vehicle is already registered and certified by the National Transport Licensing Board it would only be a matter of transfer and renewal.

We were racing against time since she was to be in the country for under a month by which time we had to get the vehicle, comply with the entire legal requirements including transfer of ownership, Sacco registration, inspection and refurbishing the van. On the third day of our search- we found one van that fitted our budget and also had the features we were looking for- the negations started and a date was set for the change of hands. We had our mechanic at hand all during the search; he assured us that the van was maintainable

When the day finally came, payment was made, we bought the van during it normal daily routine. Our first stop was at the garage. Being a second hand van- we had set aside a certain amount out of the initial capital, to renew the vehicle. What we were looking for was the right image. The van was due for inspection in three months. Despite having a nice appearance we were not very sure about the mechanical state. 200k had been prepared for this task.
On the advice of our trusted mechanic, we bought a complete suspension system- steering, ball joints- shocks absorbers- brake system from the master cylinder to brake pads- idle arms, hand brake cable and finally brand new tires. Satisfied with the front parts, we turn to the rear suspension- the shocks were okay- we serviced the deferential, changed the transmission fluids- replaced the brakes lining and hydraulic cylinders and adjusters- leaf springs bushes, and again another set of brand new tires. It was now time for computerized inspection; this is where the vehicle is placed on various computerized machine that checks vehicle’s stability and wheels alignments-etc. most of the parts were new by now and that bridge we crossed.
We turned to the electrician- replaced broken lenses- bought new clips and connectors- rewired the dashboard to revive all signals and indicators. The next step was to check the safety requirements; we replaced broken seatbelts- bought a new first aid box and fire extinguisher – and reinforced the seats. We turned to the doors; serviced the locks, replaced worn out rubbers, bushes and winding machines. There was a small leakage at the rear end which allowed water to drip inside during heavy down pours; we decided to replace the entire boot door.
By now the van had acquired a new look and stability. It was time to check the engine; we had settled for this particular vehicle because our trusted mechanic had assured us that the engine was in sound working condition, nevertheless, we decided to give it new life. We changed engine oil, replaced air, oil and diesel filters, cleaned the radiator, added coolants and finally serviced the gear box system and added the required level of the transmission fluid. Now the van was ready to start providing transport services to the great people of republic of Kenya.
Only two things remained and these are the most import for our venture to be successful. The choice of the matatu Sacco and the crew; The Sacco provides the assistance acquired for a license from the Transport Licensing Board which allows one to operate in the route of choice. We had settled for route 125 Rongai- to – Nairobi. This route has five different Sacco societies. We visit three Sacco weighing out the advantages and what they had to offer in line with our business plan. We settled for the one with the widest coverage and better accountability. We paid the registration fee, bought cashless machines, paid taxes as required by the Traffic act, paid for change of TLB license and we were issued with the franchise to operate.
her flight back to work in UK was in a weeks time. for Seven days she watched her matatu competing for passengers in the busy Nairobi streets.

 
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Posted by on June 24, 2015 in Its life, Matatu matters

 

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Using ICT to address employment and safety in the matatu sector.

The use of new information and communications technology{ICT} has been applied in many ways in various fields to collect data, improve lifestyles and most important to avert disasters. Data collection for whatever reason is the first step to winning any warfare. We have seen modern ICT being used by our military as they battle terrorists in Somalia. The use of remote controlled drones for surveillance and even to launch missile attacks in high risk targets has become an effective tool of war with very positive result.
The same is happening in the public transport sector thanks to A group of Researchers from Nairobi university in collaborations with their counterparts in university of California at Berkeley in the US. The team has come up with a new technology that will probably provide a better approach that could be used to leverage the positive aspects of both the investors input; and workers performance; by providing reliable data that can be the key to improved safety, accessibility and efficiency.
David is a researcher from university of California at Berkeley USA and he has been in the country on several occasions for his research. I was introduced to David sometimes last year by one Professor from UON for a interview request. He wanted me to help him Access some of the stakeholders in the matatu sector for his research. When we started, David was more interested in monitoring and measuring corruption in the matatu industry. but after several meetings with drivers- conductors and managers- he soon realized, however, that the matatu industry is much more than a simple transfer of commuters.
This highly unappreciated industry is a fascinating expression of African entrepreneurship that has evolved into a multimillion investment; creating employment for more than a hundred thousand Kenyans and the only optional source of mobility {other than walking} for millions of people who rely on public transport every day. I teamed up with David and with a lot of support from university of California at Berkeley in America and our friends from university of Nairobi, we set out to clearly understand this vicious cycle that shapes the nature of public service operations in Kenya especially Nairobi.
According to our findings after numerous interviews with the stakeholders; majority of drivers complained of working long hours, and incentivized with high-revenue targets that they have to meet every single day. Lack of formal employment was also another obstacle for many workers {meaning no job security, no pay-slip, no insurance, no access to finance,} and therefore no stable career path to the middle class. They said they are rarely appreciated for their services despite doing their best.
Matatu owners on the other hand complained of driver’s recklessness and rude-mannered behaviors. Listening to majority of these owners, one would be persuaded to ask “why they even hire their vehicles to these drivers in the first place” if they don’t trust them at all. I know for a fact that this is just a myth and one that matatu owners have chosen to hold on to;since it is beneficial to them. by  avoiding taking full responsibility for their employees, they get away with paying taxable salaries and they can hire and fire them at will. Clearly, not all drivers are saints, and again not all drivers are reckless, what was lacking was prove..
David was more convinced that, the dispute; the hostility and suspicion could be addressed. We had identified miscommunication or lack of tangible facts as one of the sources of the problems. and by bridging the communication gaps; we could find a way to enhance the flow of factual information between the workers and the owners. According to him, a solution could be found with the introduction of new information and communication technology to the matatu sector.
We started out a pilot project codenamed “SMART-MATATU; where we fitted 10 Matatus {plying Rongai to Nairobi Route} with a top of the range and well supported Web- Based GPS Tracking device. This system offers wide range of Fleet Management Solutions that gives the matatu owners full control of their fleet and access to their vehicles from any location. Through a computer or smart mobile phone, the System enables the user to; know the vehicle’s real-time position by time interval, Receive alerts for off-road driving, over speeding, sudden breaking and various driving behaviors’ alerts. The system has a Geo-fenced control to regulate movement boundaries; it records the number of trips made to and from the destination and also kilometers covered at any given time.
Advantages v/s disadvantages.
Three months down the line, we have managed to sustain the project; though with lots of challenges. At the same time; we have also shared the findings and got feedback from matatu owners and drivers respectively. The project has had its casualties and beneficiaries. One driver and his conductor were fired when they were caught by police working past the hours; after lying to the owner that they had closed business. the crew abandoned the van but we were able to trace its location. This device is so unique compared to other tracking devices since it has specifically been designed to track driving behaviors; the owner can be able to tell at what time the engine starts running and when it was switched off, When a driver over speeds on speed bumps, exceed speed limits, overlapping, driving off-road or when he diverts to a different route.
On the other hand matatu owners are pleased with the device since they can now be able to know the actual number of trips the matatu makes to and from Nairobi and also compare driving style for different drivers. This will in the long run create trust and most important a better relationship between the owner and the workers. Some of the owners we interviewed told us that they would have no problem employing their drivers on permanent basis now that they know they can trust them.

 
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Posted by on April 20, 2015 in Its life, Matatu matters

 

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Frequently asked questions on matatu investment 2015.

1. >I saw your blog post on matatu business and you mentioned that you were setting up a transport management company. I would like to know if you have achieved this and if so if you have more information for investors?

We are in the final process of registering the transport management company; we have identified most of the challenges facing investors and we have come up with the strategy to address those issues. We are currently working with other saccos within Rongai route as unit managers, we are targeting to meet the recommended 30 units to get a license from the NTSA. So far we have managed to get 14 vehicles which we have fitted with a fleet management system/ GPS tracking and Cashless system. We pay between 3000 and 3500 for a 14 seater van and between 8 and 9000 for a minibus provided it meets the requirement for the current market. email us for more information. guidancetravel@yahoo.com or call James- 0704 606730

2. >Thanx Wambururu for the good work you are doing and the responses you give. Am gonna be direct on this. I am set to join the matatu industry, i have a good manager who i believe will take my business forward . My manager has told me that we should focus on acquiring an ex tour vehicle, probably a DT Dobie Urvan. I have identified several on OLX , but my question is, How do i ensure that the vehicle is in a good mechanical position as the owners claim, what sort of inspection can i subject it to make sure that the engine, chasis and the body are in a good condition?
It is very tricky to get TLB for a 14 seater especially if the vehicle you plan to use has never been a matatu before- EX Tours are thought to be better but that is not a guarantee that they are always in good condition. Furthermore the choice of the make {Nissan /toyota} is very important and differs for different routes. Nissan is better and more efficient for short distance- town service routes while as a Toyota is best for long distance and hills. You need a good mechanic who is specialized in the model you wish to buy and follow his advice. A recently government -inspected van is an advantage.
3. >I have 2M .My home is in Ngong.I have been working outside country as a Mechanic and I am returning home.I can get financier and buy a 33 seater minibus I want the matatu to operate on route 111 or Kiserian route so that I can easily monitor it. I am mechanic and I can manage the repairs myself in my home. Kindly advice on whether my dreams are valid and the challenges I might face, and whether its advice able to take the risk.

You seem like a person who is set for matatu business and I would really encourage you to follow your dreams of owning a matatu or probably a fleet in future- You already have about 2million, a financer and a destined Sacco which is route 111 Ngong—Nairobi.
You also happen to be a skilled mechanic which is necessary and will reduce the maintenance cost; what you need is a crew especially the driver who understands the business and can safely take good care of your vehicles.
You also need a join a Sacco that has a fleet management system- GPS tracking and a cashless system. That way, you will be able to monitor your vehicle- know how many kilometers/ trips it has made- driving behaviors of different drivers etc.
4. >Hi Wambururu, am Kamau and much interested in owning a second hand matatu soon. I want to join a sacco whereby i would be saving 20,000 per month. In 7 months time i will have 140,000 then i would like to take a loan 5 times of my savings for me to have 700,000 to buy a second hand matatu. Now my question is does your matatu sacco offer such kind of services if not can you advice or refer me to any other matatu sacco.
Thanks in advance
Ours is a transport management limited company- we are registered under the registrar of companies act. However I work closely with matatu Sacco’s in Kajiado- Rongai Kiseria and Ngong; I know of one Sacco in particular that has been lending capital to drivers to buy their own vans as long as they remain with the Sacco. You need to first register for membership @ 5000 and then you start saving; they normally give 3 times your savings but I’m sure they can be very helpful in a situation like yours.

5. >I have been a good fan of your blogs. I would like to inquire about investing in the matatu business.
Is it possible for me to start with 00.ksh.. I mean, can I get a loan with the matatu as the security?
Thanks

Nothing is impossible though some things are said to be next to impossible; most banks will not finance a matatu no matter how much you are willing to deposit. Different banks and financial institutions offer different packages on asset finance. The best way to get the facts is to talk to loan managers. I have seen adverts from Equity bank where they claim to finance up to 105%. One thing I know is that you need at least a six months bank statement and in case of financing a matatu, you need to have a very active business account or another matatu already on the road.

6. > Hi,your blog is really helping. Anyway I’m thinking on acquiring 2 brand new 33seater Isuzu from GM and put them through githurai 45 route.
Will the returns be good?
How are the saccos over there?
Please advice
Minibuses are taking over the matatu business though they have to face a stiff competition from the larger capacity buses. Githurai is popular with 51 seater buses and since they are in large supply, they easily handle the flow of passengers to a manageable level which strikes a balance between the price, demand and supply. Since matatu business is a trade like most businesses; where the law of demand and supply applies Githurai route does not offer the best investment opportunity. However tides are changing and passengers are shifting to vehicles with fewer capacity which are quick to fill and more comfortable.

7. >I have been reading these article and comments and just trying to make sense out of everything, what i would like to know is what to include in a proposal for getting a loan from an investor ,i know most of these comments are a bit out of date and probably the market has shifted a bit ,kindly can you advice on these matter as i am interested in getting my claws in these business .thank you for your consideration.
I have tried to cover this in question 5 above; nonetheless, I have to agree with you that the comments are a bit back dated but not much has changed on the ground. You will need to talk with your bank manager and see what they are offering then compare with what Sacco’s are giving.
8. >Thank you for your article, I invested in second hand a 51 seater bus being financed by my sacco but upto date i have not made any profit from it,it have consumed all my money but am optimistic ill make it..my Sacco have been very supportive, they want to restructure the loan n be paying small installment, my question is?
1. my current job is not paying well and am not permanently employed, can i leave it and be going with the bus..am convinced i can get 8k per day.
2. Whats your take on repayment procedure.
You have not said how long you have had the bus and again which route you operate; this is very important and I believe it has a lot to do with your current situation. it is advisable to always keep the supply line open I.E. quitting your job might not be the smartest thing to do for now. There is a reason why your bus is not doing well/ making any profit- this may result from mechanical condition of the bus- crew- or even Sacco management among other factors. I would recommend you get a person you can trust to work with your bus and identify the cause of the problems.
If I got your second question correct- you want to know my take on the repayment procedure- I don’t know how much you owe the Sacco or whether you are paying a fixed interest or in a reducing balance basis. You can email me more details.. Wambururu@gmail.com.

9. > Hi Wambururu, thanks for the great information you are providing on your blog regarding investing in the Matatu industry. I’m 22 yrs managing my own food delivery business in Nairobi, i was a rongai resident before i moved to South c,i save 4500 per day and i want to venture into the 33 seater matatu business by the end of the year. is it possible to approach a bank and what r the requirements..
Congratulation for the good work you are doing and a profitable venture indeed. You have an upper hand in getting financing from most banks if you are operating a business account. With your savings which I would estimate to be over 120,000 per month, you only need a six months bank statement- a deposit of 969.000 Kes, call this number for more info- 0722 140 378 Yvonne Mengo- sales team leader ACMG authorized ISUZU Dealer for GMEA.

10. >I have developed great interest for the matatu industry. And from the previous advise you’ve given other people I have decided to buy a second hand 33 seated instead of taking a loan. My route of interest is githurai 45 and I would like you to manage it for me. How much should I expect per day?
I’m not familiar with Githurai route; so, I can’t promise you how much I can raise in a day and also the condition of the second hand 33 seater minibus. If we estimate that you will get the vehicle at around 1.8M, I can approximate the same to bring home between 5—6,000Kes. This might not be the actual figures, like I said earlier; it will depended on the condition of the bus. Instead of a second hand minibus, I would recommend you buy two 14 seaters approximately 1.6m. They will each give you a minimum of 3500 Kes Daily that is 7000 per day.
11. >. I live in Kisumu and My most burning question is how much does a brand new 33 seater cost visa vis a second hand. I have 1.2M and am spoilt for choices to go for either a 33 seater or 14 seater, that is if am able to acquire the loan from NIC bank.
Secondly, am thinking of kisumu – busia rout (400/= one way, about 120km apart). Please show me some real (not ideal) calculations so as not to raise my hopes so high on profit margins.

Price for NQR 33 seater brand new and payment plan is as follows. The selling price for a 33 seater Isuzu NQR is ksh4,827,000.You are required to pay a deposit of ksh.968,400.The bank finance upto 80% at 8.7 flat rate. The monthly installment is ksh.135,265 for 3years.So the total interest adds up to ksh.1,007,000.
See 16 and 17 below for an actual {not Ideal} breakdown.

12. >Thanks a lot for such informative n educative thread….am planning to venture on matatu business but second hand.
Kindly advice the best matatu, Nissan to buy coz i hear kuna Toyota caravan n shark..And others..Which is best…all in all what one has to check to find if the matatu is good..coz i hear my friend bought one but after had an issue with number plate with kra.
There are two models of 14 seaters that are currently in the market and have been approved by the governing Authority. The Toyota 5Litre engine, diesel and Nissan caravan. Toyota 5L model is the most common even though it is no longer registered. The last of its type was manufactured in 2003 and that is over ten years ago. Our laws on importation of used vehicles limits up to ten years. This model is now replaced by a more modernized Toyota 7L Diesel: and custom made Nissan {box}.
As for issues to do with proof of ownership; you should first do a check/search at NTSA/ KRA- if you have any doubts, don’t buy.
13. >Hi Wambururu! I hve 1m cash and am interested in owning a 33 seater Minibus can i get a finance option frm a bank, which is the best Bank or institution ? Pliz advise.
Yes it is possible to get finance from banks as long as you can assure them that you are able to pay back the loan and also if you can afford the deposit. Most banks finance up to 70%. The tricky part is that you have to have operated a business account for minimum of six months showing deposits equivalent to the monthly installments. What I mean is; for a bank to give you a loan to buy a public service vehicle, you need to have an alternative income that can continue paying the loans in case the matatu breaks down.
14. >Thanks 4 wonderful teaching God bless u.my question it is a good idea to buy 14 seater Toyota second hand about 250k to 300k replace with new egn + gearbox so that i can be on safe side in terms maintenance and how much do i need plz?
A new 5l engine for Toyota shark costs around 350,000 and the gear box costs about 50,000 – 60,000.If you were to give it a fresh coat of paint and probably some interior work, seats covers.\, belts, music system etc, you will need about 60—80,000. In total you will require approximately half a million shillings. Add this to the purchasing price and you end up spending about 850,000 KES.
15. >Hi Wambururu,
I really like your honest and informative answers.I would like to know how much (minimum] one may need to go for a loan for a 33 seater mini bus and where to start, is it GM or a particular Sacco or bank?
If I am new in Matatu business and i want to learn is it advisable to start with a second hand 14 seater or a 33 seater on financing?
For your first question on cost of a 33 seater, see answer for question {11} above.
And again i think you should start low. What I mean is, start with a 14 seater, run it for six months or so and understand the business, then you can decide whether you wish to invest in a 33 seater.

16. >I’m interested in investing in transport business. Toyota 5L used is my target, currently I can raise about 800k. My concern is, First I’m out of the country for a period of time and the management of this venture is dreadful to say the least. Second, my view is a long term investment by ploughing back the proceeds into the venture.. At certain point you mentioned about registering a venture to manage this profitable but highly risk business. Now in the view of these circumstances, what assurance do I have from you personally as a manager and confidant regarding safeguarding my interest..
It might appear like a high risk business but it is not such. Matatu investment is a public service provision business that has very good returns. Below is monthly review for a 14 seater.
JANUARY 2015
KAY —–X. ———————————— 14 SEATER

REG.NO.
  1st   2nd   3nd     4th         5th         6th          7th           TOTAL

3500   3500   3500   3500     3000     ——        2000         19.000
  8th    9th    10th    11th      12th        13th      14th
  3500   3500  3500   3000     3500       3300   3000         23.300
15th   16th   17th    18th      19th        20th      21st
1000   3500   3300   3500   3300       3500      2000        19.900
22nd   23nd   24th   25th     26th       27th       28th
    3500   3500   1000   3500   2500   3200      3000        20.200
29th   30th   31st.
….  2900    3500                                                          6 .400
TOTAL = 88.800
EXPENSES.
FULL SERVICE. {OIL/FILTER/PADS/ DIESEL FILTER/ ELEMENTS/ GREASE.}= 5.300
ALIGNMENT.= 1200                                REAF SPRING.=1500
BUSHES.=600                                       LABOR.=1500
NEW MID-RANGE SPEAKER.= 3500      INSURANCE.= 7800
WELDING REPAIR. = 1000                    WIRE/ COMPENSATION = 4000
PARKING KAJIADO.= 1500                    NOZZLES SERVICE .= 3000
PARKING NRB.= 3600

TOTAL .= 32.500.00
GROSS INCOME .= 88.800.00
LESS EXPENSES= 32.500.00
NET INCOME= 56.300.00.
As your manager, I will be sending you a bank slip for the net income and also give you the breakdown. Alternatively, we can agree I be depositing a flat rate of 50.000 kes per month and take care of maintenance and all expenses, insurance parking, servicing and replacing minor parts.
17. >Thank you But is it a guarantee that they can pay up the loan on themselves because I have seen banks repossessing some of these buses and that might be a problem.. And on another note, is it advisable to take two 37 seater buses or put a deposit on a bigger bus and which Company/sacco would you advice..
Buses have high capacity and yes it is true they carry more passengers; but in matatu business especially short distance routes, they don’t attract more customers-pasengers still prefer low capacity vehicles that fill easily and are faster. Fare price also differs and by large margins.
A 51 seater bus plying nrb Rongai routes make four return trips in a day at an average fare price of 40 kes.{ 50 passengers X 40 Kes X 4 trips X 2 {return}= 16,000 Kes.
Fuel is = 4500-5000. Sacco contribution + police, touts, etc= 2,000, salaries= 3,000. Net income is about 6,000.
A 33 seater{ MANYANGA} minibus does 7 return trips at an average of 60 kes, ={ 32 passengers X 60 kes X 7 trips X 2 {return}= 26880.
Fuel is= 6,500—7,000. Sacco contribution+ police and normal expences = 4000. Salaries= 4000. Net income is between 10—11000Kes.

18. >Pls am from Ghana and i want to start a matatau transport business in Kenya. Pls i want to know if it is possible for a non Kenya can invest in the business. And how much is the Kenya shillings to one US DOLLAR. Thank u
I don’t think it would be a problem to invest { although I’m not sure about what the law says; but I know some foreigners who have bought rental houses and public service buses; as long as you are not the driver- you can surely invest in the industry and get your money at you bank just like anyother investor. One US Dollar is exchanging @ 90 KES. To put a brand new 33 seater minibus that meets the current market on the road, you will require about 59.000 US Dollars.

 
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Posted by on February 20, 2015 in Its life, Matatu matters, Spiritual wisdom

 

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Let us make laws that we can implement and sustain.

Kenya is still ranked as a third world country. As much as We {Kenyans} don’t love or feel comfortable being referred as a 3nd world, we cannot escape this classification since it is not based on what we would wish’ but what we have done compared to other nations of the earth.
We may be building standard gauge railways and probably subways are on the way, Its true, these infrastructures will indeed; push us forward toward escaping the ratings, ease how we travel and communicate and make our country more attractive to other developed nations. But as it stands today we are still a 3nd world.
Our president is leading from the front and we all admire his confidence, we are encouraged by his determination to get us out of the woods, not only for us Kenyans but for Africa as a whole. His call for African solution for Africa’s problems is a pointer to finding lasting solutions to local problems in the continent and even here at home.
Since the Jubilee government come to power, law makers have been very busy making and amending laws. Almost every law in the constitution has been challenged, amended or changed; Media freedom, security, bills of rights, and” of course”  “Traffic act.”
I was among the invited participants to a discussion on the proposed amendments to section 42 of the traffic act {cap 403} this is an act of our traffic laws that deals with safety of children. The bill was tabled in parliament by honorable Member of Parliament for Laisami Joseph Kuton. The bill which is in its third reading in parliament and {according to Hon. Kuton} it will soon be passed to law if the president is okay with it.
The forum was organized by Kenya Alliance for Residents Association {KARA}; National Transport and Safety Authority {NTSA} and Columbia University center for urban Development Among other institutions. The speakers included the deputy Director of safety at NTSA Dr. Duncan kibogong; Institute of legislative affairs CEO Vincent Kimosop, center for sustainable urban development; Dr Jackie Kropp, the sponsor of the bill Hon. Joseph kuton and Kara director Dr. Henry … among others.
The amendments to this act seek to improve children’s safety within the boundaries of their learning institutions, and while on transit to and from schools and non school related activities. Majority of those in-attendances were very objective that this is the way to go. “When we were each asked what our individual expectations were, almost everyone including the media which was well represented was optimistic the bill should go through. On the other hand, I was a bit pessimistic.
I’ve heard it is said that; the devil is in the details.
Section 42 of the Traffic Act (hereinafter referred to as “the Principal Act”) is to be amended by inserting the following new subsections immediately after subsection (3)-

*(3A) A person shall not drive, or, being the owner or person in charge of a vehicle, cause or permit any other person to drive, any vehicle at a speed exceeding thirty kilometres per hour on any road within the boundaries of-
(a) A nursery, primary or secondary school;
(b) An institution where -children reside or normally access by children;
(c) A public playing ground which is normally accessed by children;
(d) An area used by children when crossing to and from school; or
(e) Any health facility.
A person who contravenes this section commits an offence and shall be liable to a fine of 50.000 KES or imprisonment for a term not exceeding 2 months or both.

I don’t have a problem with the speed limit; what I fail to understand is why? The act only prescribes a penalty or punishment to drivers and not to the Authorities responsible for ensuring that all the supporting infrastructures are in place before the law takes effect?

For instance; the act mandates the highway Authority to; erect and maintain traffic signs as prescribed in the Act so as plainly to indicate to drivers entering or leaving such roads or areas referred to under subsection (3A) where the thirty kilometers per hour speed limit restriction begins and ends;
They are also responsible for; electing, constructing and maintaining speed limiting road design features such as speed bumps or rumble strips, and traffic circles on the roads referred to under subsection (3A) at the areas specifically designated for pedestrian crossing or on any road within a built up area or any section of a road where forward visibility is short.
The highway authority should also Ensure that; traffic routes in the vicinity of nursery, primary or secondary schools and those giving access to the schools are planned, designed, equipped and maintained with safety features such as wide pavements, footpaths, cycle-tracks, roadside barriers, pedestrian crossings and underpasses and footbridges with appropriate signs and markings.

The absence of any of the above infrastructures can lead to violation of the act. I believe the highway authority or NTSA for that matter should also be held responsible and charged in court if an accident occurs or even when the said law is violated where they have not complied.

The other proposed amendment to the Traffic act is in section 1058.
(1) A person or institution shall not designate or use a vehicle for transporting children to and from school or school or non-school related activity unless the vehicle meets the prescribed standards. It gives the Cabinet secretary the overall responsibility of setting the prescribed standards
(2) Notwithstanding subsection (l), a vehicle designated for transporting children To or from school or for any non-school related activity when they are in a group shall be fitted with the prescribed child safety equipments! Design safety features or structures.
A person who, carries or permits another person to carry a child under the age of eight years, on board a vehicle shall ensure that-
(a) The vehicle is fitted with the prescribed child restraint device or Seat; and
(b) The child is always placed in the device or seat whenever on board a vehicle in accordance with the prescribed instructions or guidelines.
A person who being the owner, manager, teacher of a school or a driver of a used for vehicle transporting children, who authorizes or permits the use of a vehicle used for transporting children or is negligent to prevent contravention with this Act commits an offense and shall be liable to a fine not exceeding fifty thousand shillings or imprisoned for a term not exceeding two months or both.

This are the set of laws that every parent would wish to see passed; but as they say. Wishes are not horses, if they were, every beggar would own one.

If the proposed amendments goes through and become law, it will be illegal for a matatu to transport children. students are not among the matatu investors target group and  don’t think any investor will do anything about meeting the requirements or standards. And since Matatus do not meet the prescribed standards i.e. they don’t have child restraints or seats for children, it will be illegal to carry them.

What we need to first ask ourselves is; why do school going children use unsafe transport/ matatus in the first place?

In my observation as a matatu driver, majority of the school going children who go to school via public transport are those from free public schools. Quite a number of those are from the poor families who take advantage of free education and probably because those schools are quite a distance from home, the children must need transport. Most of these public schools don’t provide transport and that is where we as the matatu fraternity come in.
Matatus are probably the only affordable means/ option for majority of people in Kenya to travel long and short distances. This also includes the school going children who need to board Matatus to and fro school. We are the ones Head teachers call upon to provide transport to students during curriculum related activities like drama festivals, school trips, etc. and since the education ministry has not come up with alternative means of transport to meet this need, Matatus are left with the responsibility of providing the much needed services.
Kenya is a developing country which means, it does not have all the infrastructures or the means to sustain and fully implement this laws.

 
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Posted by on February 2, 2015 in Its life, Matatu matters

 

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