Time for an overhaul

When Uber launched in South Africa a decade ago, it felt like we’d stepped into the future. Remember the thrill of opening the app and conjuring a lift out of thin air? The experience was so good that Uber’s popularity skyrocketed and unleashed a slew of competitors like Bolt and others.

The concept was genius: Drivers could maximise the use of vehicles that would normally spend 75% of their lives standing still, and commuters could potentially convert some of the big, fixed expense of owing a vehicle into smaller, monthly expenses. At the time, people talked about selling their cars, or maybe a second car, and using Uber for daily trips.

But since then, the shine has faded. Whether or not Covid-19 was to blame, or simply because the industry grew too big too fast, e-hailing is a shadow of its former self.

As Daily Investor puts it: ‘Uber faces severe challenges in South Africa, including cars in a dilapidated state, bad drivers, frequent cancelled trips, driver strikes, and passengers being attacked and robbed.’  

To evaluate the extent of the industry’s struggles, and to see how far it has fallen from the lofty heights of six years ago, we looked at how 22seven users are spending on Uber and other e-hailing apps.

The first metric we evaluated was spend on e-hailing as a proportion of total fuel spend. In the years before the Covid pandemic (2020), this was relatively stable. It fell sharply in 2021, however, and has never recovered.

We need to bear in mind that the price of fuel has increased rapidly over the period, evidenced by the sharp increase in average transaction value at fuel stations. Still, the average transaction value increase doesn’t match the fuel price increase, which suggests that users are moderating their driving: buying fewer litres at the pumps or topping up with less more often.

The chart below contrasts the average transaction value on fuel with the average e-hailing transaction value (right-hand side). On average, users spent less on an Uber trip in 2023 than they did in 2018…

Uber has introduced lower-cost alternatives, which may explain some of the decreases in spend, but what about the criticism of dilapidated and unroadworthy vehicles? With the cost of fuel having increased by 60% since 2020, not to mention the rising cost of vehicle financing thanks to higher interest rates, it’s no wonder that this core competency has taken a back seat…

The price of fuel is just one factor that has affected e-hailing. Maybe safety concerns during Covid caused users to move away, which led to lower spend, less maintenance and a weaker experience overall; or the service deteriorated first, which caused users to move away. Either way you look at it, fewer 22seven users are using e-hailing apps and those who do use them less often.

We’re in a dark tunnel, but maybe there’s a light at the end. Technology enabled the first phase of e-hailing and unlocked an undeniable benefit to society, there’s no reason why it can’t lead the industry into the next phase.

With a smartphone in nearly every rider and driver’s pocket, it is not hard to imagine a world where the incentives of both groups are matched more efficiently. For example, most of us would happily pay more for a ride if we could be certain ahead of time that the driver would obey the rules of the road and the vehicle would be roadworthy, air-conditioned and not smell of gym shoes.

Surely there’s an app for that?

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22seven Insights gives professionals a unique view of consumer spending, even when private companies are involved. Get in touch if you want to know more about the transport sector or any other sector – retail, grocery, apparel, homeware, communication, health and more.

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‍‍22seven is a safe and secure digital service that allows you to see all your money in one place and get a personalised budget, automatically. Our goal is to help South Africans take control of their finances.