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Multi-billion shilling ‘matatunomics’ cancer killing investors

Cash-hungry investors surrender their vehicles to organised gangs that have say on what they earn

@faminga

The runaway impunity in the matatu industry costs owners close to Sh50 billion annually as cartels leverage on weak regulations to fleece investors in the sector.

Behind the veneer of loud music and graffiti lurks a terrified group of  owners who have very little control of what they ought to earn daily.

Instead they kowtow in a vacuum that has since been filled by organised gangs, rogue police officers, county security personnel, touts and drivers who are making a killing from their investment.

Every day, vehicle owners who are now pawns in a scheme, part with an average of Sh600 per vehicle to the cartels.

It is an industry where an investor sets aside up to Sh5 million to buy and pimp a matatu, only to hand it over to a driver and tout, sometimes, a manager to help in coordination of operations. These are the people who have to deal with the cartels, county officers and police officers who man the roads and terminus.

“In this business you must have thick skin. You must also be ready to ‘toboka’ (pay cash in the value chain) otherwise you go to ‘ushago’ (home),” says a tout only known as Kim managing one of the Buru Buru matatus in Nairobi.

A former tout, who now owns a fleet of vehicles at Umoinner Sacco, confided to People Daily that there is a thin line between the gangs, cartels and the touts, and since the owner is hardly with the drivers and touts, many times they come with reasons to dig into the profits blaming cartels and policemen.

In essence, this is a business whereby people who did not invest even a single cent into buying the matatu are poised to reap where they did not sow even as the owners continue to pay loans amid depreciation of their vehicles.

To operate a matatu, one must be a member of a Savings and Credit Cooperative Societies (Saccos) and is expected to make frequent contributions to run it. There is, however, a one-off payment which costs between Sh100,000 and Sh300,000 depending on the presumed profitability of the Sacco. Most times, the investors buy their own vehicles or they do so in groups, they then hand over the matutu to a Sacco which decides who will manage the investment.

“Once the vehicle is driven out of a showroom, it is no longer yours. The vehicle is handed over to a group of people manning a Sacco and then you wait for payments per agreements with the crew. But mostly the crew calls demanding for bailout cash,” says Joel Momanyi, whose matatu operates the Kitengela route.

He says that is not even the biggest challenge, but a breed of self entitled cartels that claim ownership of stages and matatu terminus throughout the country give investors sleepless nights.

But the elephant in the room is that, most of these people work closely with some unscrupulous traffic police officers, making it very difficult to weed out the cartels.

Money leakage

Reporting them is considered a waste of time, but before the verbal and physical threats, it could sometimes turn tragic for those disobeying them.

People Daily investigations estimate that they pay a minimum of Sh600 daily to cartels who include county askari’s, police and route managers.

Considering there are close to 100,000 matatus in operation on any day  — according to Simon Kimutai, an investor in the sector and chairman of Matatu Owners Association —  this adds up to a whopping Sh60 million daily .

Kimutai estimates that the leakage adds up to Sh50 billion annually.

If the vehicle passes through another route for whatever reason, they must pay more to either the police or cartels operating in those routes lest they face the consequences.

If you do not pay cash, your vehicle will be marked and the consequences could be dire, so most operators play ball to avoid trouble.

But other Saccos — for example one that manages the matatus in Nairobi’s Kasarani route — charge the owners a fixed fee of about Sh2,500 daily.

A matatu operator confided to People Daily that the money paid to the chairman is meant to take care of the cartels in the value chain.

“You will hardly be harassed, and in case of trouble the chairman will take care of it including dealing with the police. If they take you to the police station you just report to the Sacco and you are sorted without paying any extra fee,” he said.

The cut throat business is affecting performance of most operators whereby in this vicious cycle, the vehicle owners hardly gets enough from the cash, going by the number of operators who have unable to service their loans.

Most yards are now full with vehicles bought before 2016 after being repossessed by lenders awaiting auction. Loan default is compounded by quick depreciation on account of the poor state of roads, high cost of fuel, insurance, levies which dilutes return on investment.

However, the glitter and hype associated with the sector is still big, going by the number of new matatus being unveiled annually.

The recently launched Economic Survey 2018 estimates that the number of Public Service Vehicles (PSV) licences issued to matatus more than doubled from 17,926 in 2016 to 37,382 in 2017 and constituted 69.6 per cent of all licenses issued in the review period.

The number of PSV licences issued to buses increased by 67.3 per cent from 7,210 in 2016 to 12,064 in 2017.

The allure could be attributed to the quick cash that exchanges hands daily. Working with a conservative estimate of Sh5,000 per vehicle, the industry pushes in excess of Sh500 million daily which is in excess of Sh182 billion passing through the hands of the industry annually.

“It is very easy to own a matatu and get a route to operate. However, once you get in, you find that it is a different ball game. But again, it is also very difficult to get out of it,” says Kimutai.

But despite all this, matatu’s have becomes a necessary evil that must exist for the economy to grow.

However, investors could be more comfortable with a more regularised environment but the sector has consistently reneged against various attempts to bring sanity to the sector.

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