Business: Investing In The Matatu Industry

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What comes to your mind when you watch the ‘nganyas’ plying side-to-side with your car, swerving through traffic jams while carrying a load of millennials from point A to point B? Do you see opportunity or chaos, or both? The reality is that the matatu industry is now on another level. This level comes with new rules that will either make or break you (if you’re currently on board).

They are becoming more reliable in transport and a very profitable business for investors. As you scale the ladder, more and more risks are unveiled. The government is also tightening the rules of the game which on one side is positive, but on the flipside is negative. But as we all know, living in a country where everyone comes up with his/her own rules of engagement, the system is definitely set to fail at the end of the day. Since the times of Michuki Laws, to the Graffiti laws, and currently the Mutua laws on Video Screens, all these regimes come up with new laws that then fail after some time.

matatu culture. Image from https://edition.cnn.com/travel/article/matatu-culture-nairobi/index.html

But this shouldn’t blow your dreams up young investor who wants to have his nganya compete for the Matwana Culture Hottest Wheels in the street. Here is what you need to know prior to investing in this industry:

  1. It is an expensive investment:

When I first boarded Phantom (when it was still brand new), I used to look at the various accessories inside the ‘Passenger Lounge’ and wonder a lot. From the many TFT (Thin film transistor) screens at the back of every seat, to the LED (Light Emitting Diode) screens mounted on the roof and window—note why I’m writing the acronyms in full. So these are some of the expenses you’ll incur when pimping your mat.

You’ll also require a further 500k for a comprehensive insurance cover and about 200k for extras- this include, Sacco registration, trademarks and legal fees like TLB- County Governments parking fees and others.

So, how much do you need to invest in this sector?

  1. You have to play by the rules

There’s no way to say it nicely, my friend, there is corruption – a utatoa kitu kidogo culture. You need to play by the rules in order to make a decent return. Daily Nation conducted an interview with some of the people who started this business sometime back; one of the key concern shared by all is corruption. Once a police officer stops your vehicle, you better comply with the law rather than arguing with them. And with this, one has to budget for the daily bribes to the police. If you are a morally upright person who does not want to break the rules this business is not for you. You will be frustrated by the cartels in this industry.

Another area to watch out for is your employees—the driver and the tout. These are the two people who, again, can either make you or break you. How you relate to these people is key. Though they usually tend to take something small from the daily income, it is better to give them a target for the day, upon which they will be paid. Most investors go for casual cheap labour, which is almost available at every bus stop but the issue comes up in responsibility. Your car could have caused accidents or even become towed, and without having ‘trustworthy’ employees, no one would take responsibility of this weird scenario which leaves you at the mercy of no one else but yourself.

Take that in mind.

  1. You are the CEO of your investment.

Many investors lose millions of shillings to the fraudster and corrupt government systems that control the matatu business due to their hands off diplomacy toward their investments. There is a Kikuyu saying that says “kindu no mwene” {only the owner can take care of his property.}

Many people who don’t go far in this sector are those who, learn about the millions laying unclaimed in the passenger’s transport sector and ‘without’ doing a proper research rush to make a kill. It doesn’t take much convincing to get somebody to buy a matatu since the demand for public transport in Kenya is obvious, especially in Nairobi due to the rural-urban migration we have witnessed in the last 10yrs.The unprecedented hike in fares is an indicator that the demand is going up. The problem for this “newcomers” comes when the car hits the road and the owner starts learning work-related vocabularies like, police crackdown, operation, kanjo, wire, breakdown, brake failure, music copyright, Mungiki, kamjeshi and hundreds of other payable institutions that don’t end up in the worksheet.

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