Tuesday, January 31, 2023

The hidden, dark side of matatu business that no one tells you about

By Benson Bundi

Matatu Business: Matatus are the 14- seater vehicles commonly used for public transport in Kenya. These vehicles have evolved a lot over the past decade.

The earlier model of matatus was known as the ‘shark’. These were replaced by the modern Toyota Hiace, commonly known as the ‘box’.

Joseph Mwaniki has been in the matatu industry from 2014 to 2022. Based on his experience, here is why matatus are a risky investment.

High Startup Cost

A new ‘box’ matatu costs approximately Ksh 2.8M in 2023. However, it’s 1–2-year-old version goes for approximately Ksh 1-1.5M. A ‘shark’ in good condition costs between Ksh 300 000 to Ksh 700,000. Joseph says that ‘sharks’ are ideal for town service, although you’ll spend most of your time in the garage.

After purchasing the vehicle, you’ll need to install the seats, which will cost you around Ksh 200,000. You’ll also need to install a speed governor, costing you approximately Ksh 16,000 to 20,000.

Exploitative Saccos

You’ll be required to register your matatu in a SACCO. Here, you’ll pay registration fees of Ksh 150,000 – Ksh 200,000 depending on the SACCO.

I learned the hard way matatu business is not for the fainthearted

It’s a requirement in most established matatu SACCOs for you to have the latest matatu model to be a member. Therefore, if you’re aiming to start with a second-hand vehicle, you’ll have to go for a smaller Sacco. These will allow you to join with a good second-hand vehicle, reducing your startup cost.

However, if you are a big fish and have over Ash 3M to invest, high-end saccos such as 2NK, 4NK, and Kukena are ideal.

Operational Costs

Garage and repairs

Typically, new vehicles don’t have a lot of problems. Therefore, expect to spend at least 10-15k per year on service repairs – unless you are unlucky.

Apart from service repairs, you’ll need to budget for minor repairs such as replacing broken side mirrors, lights, replacing worn tires, etc. Typically, the older the vehicle, the more you’ll spend on repairs.

Box matatus cost the most in repairs. For instance, a box matatu’s brake light goes for Ksh 3,500. The same light goes for Ash 500 on a shark matatu. That said, shark matatus are best for town service.

Recurring Costs

  • SACCO fees and shares

As a SACCO member, you’ll be required to pay daily fees for ‘SACCO maintenance’. These fees are known as ‘shares’. Most matatu saccos charge ksh 200 per day per sacco member.

You’ll also be required to pay ‘operation fees’ for stage maintenance. For instance, if you make a trip from Eastleigh to Westlands, you’ll have to leave a cut in the Eastleigh stage as operation fees. The fee is usually equivalent to one passenger’s fare.

If the vehicle charges Ksh 50 fare per seat, you’ll pay Ksh 50 operational fees. The fee is paid once per day.

  • Insurance

There are two types of matatu insurance; comprehensive and third-party. Comprehensive insurance costs Ksh 15,000 to Ksh 20,000 per month, while third-party insurance costs approximately Ksh 9,000 per month. Unsurprisingly, most people opt for third-party insurance.

  • Bylaws

Bylaws are fees paid for routes you’ll be plying. For instance, matatus on the Kirinyaga-Kutus route must pay Ksh 1,500 bylaw fees per month. If you’re in Thika sub-county, you’ll be expected to pay Ksh 2,500. Likewise, you’ll be charged Ksh 3,500 to operate within Nairobi routes.

Bylaw fees vary depending on the county, sub-county, town, or route.

Miscellaneous Costs

  • Annual inspection sticker – Ksh 1,050
  • Annual inspection process – Ash 2,000
  • Updating speed governor- Ash 6,000

Other costs include parking, carwash, traffic police bribes, fuel, and vehicle depreciation.

Bottom Line

All these costs amount to almost 900k per vehicle per year. This shows how expensive it is to survive in the matatu business. Therefore, it’s one of the riskiest businesses to start in Kenya.

Matatu Business

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