Are we paying fair fares on matatus?

 By MUNGAI KIHANYA

The Sunday Nation

Nairobi,

20 March 2011

Would it be fair for matatus to raise their fares in response to the recent increase in the price of fuel? My answer to that is a big no! As explained here five years ago (June 2006), the contribution of fuel to the cost of operating a matatu is quite small.

Think about a 14-seater matatu that consumes about one litre of diesel every 5km and operates on an average urban route of 15km. This works to about 3L of fuel per trip.

Now since December 2010 when the Energy Regulatory Commission started controlling fuel prices, the cost of diesel in Nairobi has gone up from Sh87.45 to Sh94.53 – an increase of Sh7.08. But let’s not forget that the price was already above Sh90 when the ERC stepped in. In fact I suspect that if regulation had not been implemented, diesel would be selling at more than Sh100 to day…

Going back to the matatu; the fuel cost on the average urban route has gone up by Sh21.24 per trip (one-way) since December last year. If we share this out amongst the 14 passengers, it comes to about Sh1.50 each. This would be the fair increment on the fares.

Now, with these figures in mind, we may want to know the average fuel cost per passenger per kilometre. At the rate of 5km per litre, the vehicle is consumes about 200ml every kilometre. That works to about Sh19 worth of fuel every kilometre.

Dividing this amongst the 14 passengers gives Sh1.35 per person per kilometre. So, now it is easy to find out the fuel cost of your daily journey – simply multiply the distance (in kilometres) by Sh1.35.

The results might shock you; the cost will be very low compared to the fare you pay. This is because fuel is not the only expense in the running of a matatu. There are salaries, repairs, insurance, and so on. But these are quite small also, aren’t they?

Finance is also quite high but not all vehicles are bought with bank loans. My estimation is that the greatest cost is probably theft (by staff) followed closely by extortion (by corrupt police officers and organised criminal gangs).

Another significant cost that many operators are probably not aware of is depreciation. You buy a matatu for, say, one million shillings and, one year later, you will be lucky to get some one willing to pay you Sh500,000 for it: courtesy of reckless driving over potholes and pavements.

Thus you lose about Sh40,000 every month in the first year due to depreciation. In the second year, this loss will be less, but now the maintenance cost will shoot upwards since the many broken parts will need replacement.

Depreciation is only noticed if the vehicle is actually sold. Perhaps this explains why many operators are hanging onto old dilapidated jalopies that are very expensive to keep on the road.

All things considered then, it appears that the fares we are paying are too low to sustain the operating costs and give a decent return to the operators. But the culprit is not the price of fuel: it is the other hidden costs.