New online matatu gets Sh1.5bn funding for Nairobi

A new online-hailing matatu operator, SWVL, has secured Sh1.5 billion funding to finance an aggressive route expansion plan in Nairobi.

The start-up, which was founded by Egyptian operators and is already operational on multiple Nairobi routes, has set a target to grow its network to 500 routes served by 1,000 buses.

The app-based public service transport operator that launched in Nairobi on a test basis seven months ago has already signed up 150 buses on 100 city routes.

“The investment will go into building the ecosystem, including supply and demand, bringing in drivers and creating awareness,” said SWVL co-founder and CEO, Mostafa Kandil, during the firm’s official launch in Nairobi on Thursday.

The firm, which started in Cairo, is seeking to take advantage of Nairobi’s chaotic and largely unreliable public transport system.

“Kenya is a market with a need for a stable solution for the perennial traffic snarl ups and SWVL believes that we can be of great benefit to the local consumer and the transport sector as a whole,” said Mr Kandil.

The tech company leases the vehicles that currently include 11-seater and 14-seater vans as well as 22-seater shuttles at a daily rate of $70 (Sh7,000) and $150 (Sh15,000) to ply the various routes. It tops up the daily collection if the earnings for the day are less than the daily leasing amount, but collects any income above the agreed rate.

The app-based service allows users to book trips using their mobile devices, which notifies them of the nearest pick-up point, price and time by the bus.

The driver’s contact and registration number of the vehicle as well as live map update appear on the app interface for easy identification once the buses arrive.

“We’re building a mass transit system. The investment will keep us going in this market,” said Shivachi Muleji, SWVL general manager for Kenya.

The firm says its popular routes include Ruiru to the CBD/Upper Hill, Karen to CBD/Westlands via Upper Hill, Ongata Rongai to Westlands/CBD via Upper Hill, Ruiru to Westlands, Ndenderu to CBD/ Upper Hill, and Kikuyu to CBD/ Upper Hill.

According to Mr Muleji, the company is in negotiations with local Ford dealers and a financial institution to provide vehicles at 20 percent cheaper than the market rate as well as financing options for drivers. This is aimed at growing its bus network to meet the demand of the planned route expansion. The app company, which has received pushback on some of its routes from PSV (matatu) operators, says it is engaging some Saccos in the sector to invest in the business.

The service currently charges a flat rate of Sh200 but has plans to offer distance-based pricing at the end of 2019 or early next year.

“Kenyans are picky consumers so you have to offer a premium service for the extra 10 percent you charge,” said Mr Muleji.

Tech-based solutions in the transport sector have been causing a ripple locally with Uber making its entry in the taxi business several years ago despite protests by taxis at the onset.

Kenyan-based Little Cab also offers a similar shuttle service in the market while Safiri is still in the pilot stage of data collection.