Money and Markets

UPDATED: Uber drivers' are earning less on trips, Competition Commission finds

Business Insider SA
  • As a flood of operators joined Uber over recent years, their earnings have plunged, a new report by the Competition Commission has found.
  • It offers a scathing assessment of Uber's practices in South Africa - especially its treatment of drivers.
  • Uber's corporate tax contribution also seems low, it added.
  • For more stories, go to Business Insider SA's home page.

The Competition Commission included a scathing assessment of Uber’s practices in South Africa as part of a new review into the passenger transport system.

On Wednesday, the commission published a report that included proposals to overhaul the taxi licensing system in South Africa to help increase competition and level the playing field between metered taxis and their e-hailing counterparts.

Read: South African metered taxis could get a boost against Uber from proposed new rules

As part of its report, the Commission detailed criticisms of Uber’s operations in South Africa, including allegations that some of its drivers may now be earning less than the minimum wage, as their incomes continue to fall.

For a trip of less than 2km, an Uber driver used to earn a net amount (after commission) of R68 when the e-hailing company first launched in South Africa in 2013, and when it still was looking to attract drivers, the Competition Commission said. But as more operators flooded the market, this has since been whittled away to only between R17.75 and R18.50:

Source: Competition Commission

On average, an Uber driver now needs to do four trips to reach the same amount of earnings he earned in 2013, the Commission found.

But on Friday, Uber objected to the Competition Commission comparison - saying it compared UberBlack prices to Uber X.

The first Uber service launched in South Africa, in 2013, was UberBlack, which operate with high-end black cars and professional drivers. UberBlack was launched with a minimum fare of R85. Uber realised that this pricing wasn't sustainable as riders were not taking short trips given the high price, a spokesperson said. It then lowered the price to R50 after two months. 

UberX was launched in August of 2014 with a minimum fare of R20, which was increased to R25 in late 2018. "Therefore, the appropriate comparison for uberX fares is R15 net earnings per minimum fare trip in 2014, vs R17.75 today on minimum fare trips only," a spokesperson said. The increase is below the average rate of inflation during this time. 

Some of its and Bolt's operators complained to the Competition Commission that they have signed up too many operators on their platform and are not willing to increase the fares, which is hurting drivers' income.

“The Commission received evidence that some operator's earnings are below minimum wage and they cannot quit since some have already invested in cars that they cannot attempt to sell as resale value is insufficient to repay the loan.”

Unlike in other countries, where drivers use Uber to supplement their income, the majority of Uber’s operators in South Africa are full-time drivers for the group.

Still, they are not employed by the company – they only work as contractors.

“The effect of lack of labour law regulation puts e-hailing companies in a position where they determine the rules of engagement with the operators. E-hailing operators are often in a weaker bargaining position and have no pension, sick leave, or decent work conditions,” the Competition Commission found.

The commission says that some operators allege that they can have their accounts deactivated from the platform without any recourse and work that they have no influence in fare setting despite the fact that they own the vehicles and are subjected to all operating costs.

It also found that Uber allegedly withdrew some of the incentives it gave operators when it entered the South African market.

Uber indicated that it still has other incentives such as hourly guarantees, trip bonuses, and tiered service fees. However, unlike in 2013, these incentives are now temporary and therefore uncertain.

“From the Commission’s public hearings, it was clear that operators were not consulted on any changes affecting their relationship with Uber and felt ignored and marginalised,” the report found.

In addition, the Commission noted that the corporate tax paid by Uber and Bolt appears to be "disproportionately low" compared to the revenue they generated in South Africa. But this is expected to change with the implementation of new tax rules on ‘electronic services', which was implemented last year and introduced the new VAT regime for cross-border e-commerce transactions.

Compiled by Helena Wasserman

The article has been updated to reflect Uber's objection to the Competition Commission's price comparisons.

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