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March 29, 2021

Ride-Hailing Services in Africa: Regulating a Relatively New Business Model

Tochukwu Itumo and Adeyinka Salami, Associates at Lexworth Legal Partners write on the approach to regulating the ride-share economy for this edition of ALT’s Series: Regulating Tech.

Introduction:

Ride-hailing services are the trending public transportation solution in major African cities, and since their advent, have offered innovative transport services which appeal to the continent’s teeming population, especially the youth. Ride-hailing platforms (including Uber, Bolt, etc.,) have successfully displaced traditional means of public transportation (taxis, buses, and to a certain degree, commercial motorcycles [1]) in these African cities. They offer convenience and fair pricing, which is attractive to customers. It also appeals to those who – for health and safety reasons and sometimes, time constraints – prefer private transportation.

Government Regulatory Approach:

Expectedly, this seemingly disruptive business model requires a modernised regulatory approach targeting issues including licensing, the protection of personal data, taxation, health, safety, etc. In this article, we briefly examine the regulatory approach deployed in three African Countries (Nigeria, Kenya and South Africa) and how these are expected to shape the regulation of this business model across the continent.

Health and Safety:

Concern for passenger safety came to the fore in 2017 when London’s transport authority – Transport for London (TfL) suspended Uber’s license citing “a pattern of failures” by the company including breaches that allowed unauthorised drivers to operate on the Uber platform. The manner of enforcement action and approach adopted in this circumstance has led to notable improvements in service delivery by ride-hailing companies in this and other western jurisdictions.

Following suit, government agencies in some African countries have found it necessary to enact laws addressing safety concerns for ride-hailing operations in their jurisdictions. For instance, the Lagos State Government (Nigeria) in August 2020 issued the Guidelines for Online Hailing Business Operation of Taxis in Lagos State, 2020 (the “Guidelines”). These Guidelines aim, amongst other things, to enhance the safety and security of lives and property within the State’s transportation network and to develop a robust database of the operators, drivers and passengers.

Kenya’s National Transport and Safety Authority (NTSA) regulates the ride-hailing sector through the Transport and Safety Act No. 33 of 2012. The NTSA relied on this law to ban the operation of two ride-hailing services for lack of proper registration. For more specific regulation, the Kenyan government has introduced a draft regulation that covers licensing for ride hailing platforms and drivers. Until the bill’s passage, the country’s ride-hailing model is expected to fit within existing legislative structures.

In South Africa, the proposed National Land Transport Amendment Bill [2] is specific to operators and participants in the ride-hailing sector and covers issues such as licensing, health and safety of operators and passengers. Health and safety concerns in the bill include licensing requirements, vehicle standards, transport routes, identity disclosures before boarding, etc.

Data Privacy and Protection:

The Nigeria Data Protection Regulation 2019 (NDPR) and the Kenyan Data Protection Act 2019 contain similar data privacy provisions that apply to ride-hailing services. Regulatory standards set by these laws entail the protection of customers’ personal data from theft or unauthorised access, adherence to lawful basis for data processing, standard retention policies and the preservation of customers’ privacy rights. Some ride-hailing companies (including Uber) started their operations in European countries where the General Data Protection Regulation (GDPR) applies. As such, they are expected to maintain basic data privacy standards. In Lagos, Nigeria for instance, the Guidelines grant the State’s Ministry of Transportation access to the database of the ride-hailing companies operating within the State. This raises valid concerns about data privacy. These concerns have been raised by impacted stakeholders and should, hopefully, be adequately addressed.

Taxation:

In Kenya, recent amendments to the Finance Act 2019 and Tax Laws Act 2020 brought ride-hailing companies and their operators under the country’s tax base. The amendments impose income tax on “income accruing through a digital marketplace”, and Value Added Tax to services rendered through a digital marketplace. Further, being part of the digital economy, ride-hailing services are now liable to withholding tax under the Tax Laws Act 2020. The amendment in the Finance Act also proposes a 1.5% digital tax on online transactions, 1% gross sales tax, and a minimum tax, if the tax payable is less than 1% of the Company’s gross turnover.

In Nigeria, amendments introduced by the Finance Act 2020 to Section 13(2) of the Companies Income Tax Act, make ride-hailing companies liable to Companies Income Tax in line with the international digital taxation principle of “significant economic presence”. The Finance Act also extends Value Added Tax liability (of 7.5%) to suppliers of goods and services in the digital economy and an Electronic Money Transfer Levy where payment for ride-hailing services is made through any digital platform. Apart from the above general tax regime, the Lagos State Guidelines impose a 10% service tax on transportation fares paid by passengers.

Labour Considerations:

Since inception, ride-hailing companies have described their drivers as independent contractors [3]. The implication of this is that drivers are not entitled to labour, social security (where applicable) and healthcare protection and benefits.

Under Kenyan law, there is currently no specific employment law coverage for drivers on ride-hailing platforms. Drivers are regarded as independent contractors and are not entitled to usual employee packages such as sick or annual leave, health cover, or pension contributions.  The same position obtains in Nigeria.

In 2016, the London Central Employment Tribunal held in Aslam and Others v Uber BV and Others, that drivers engaged by Uber were not self-employed contractors but fall within the legal definition of a “worker” under local UK. legislation. In February 2019, the UK.’s Supreme Court upheld this judgment, entitling these drivers to employment rights. Impelled by this decision, groups of ride-hailing drivers in South Africa filed a Class Action suit at the Johannesburg Labour Court, seeking an improvement of their labour conditions and claiming employment rights including compensation for unpaid overtime and holiday pay. A favourable judgment may result in a replication in other African countries.

In summary, it can be observed that the governments in some African countries are following global trends in this sector and proposing legislation tailored towards minimal interference while ensuring safety and protection of operators and the public at large. It would not be surprising therefore to observe more robust (and in some cases, stringent) regulations as this business model gains more public acceptance in the future.

Notes:

[1] Gokada in Nigeria and Safeboda in Kenya are examples of the successful adoption of the ride-hailing business model by motorcyclist and online delivery companies.

[2] The Bill is awaiting Presidential Assent.

[3] It is however important to note that judicial decisions on this matter may differ from what the parties intend.

 


ABOUT THE AUTHORS

Tochukwu Itumo and Adeyinka Salami are Associates at Lexworth Legal Partners, a member of the African Law and Tech Network. 

Tochukwu Itumo, Associate

Adeyinka Salami, Associate

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