The Competition Commission has published its provisional report on e-hailing and metred taxis in South Africa.
As part of the report, Uber and other e-hailing services provided information on how their dynamic pricing system works during peak times and events.
While large parts of the report are redacted for security reasons, it does provide some interesting insights into how Uber’s pricing is calculated in South Africa.
How it works
In its submission, Uber indicated that it divides cities into hexagonal zones to ensure that a change in fare is accurate and effective.
Each zone has its own dynamic price multiplier, based on the real-time demand and supply in that zone. The system frequently updates fares based on the latest, real-time conditions in each geographic area.
Uber added that dynamic pricing is not simply implemented city-wide but targeted to very small hexagonal areas. As such e-hailing operators are notified when demand increases through an in-app map, which shows the busiest areas
In some instances, e-hailing operators are provided with advance information about upcoming events which can improve their earnings
While the exact increases are redacted, the report indicates that dynamic pricing was used for Ed Sheeran concert in Johannesburg (23 – 24 March 2019) and the Global Citizen concert in December 2018.
“No dynamic pricing is observed during most of the afternoon into the night. After midnight when concert goers were leaving the venue, demand for services increased, triggering dynamic pricing,” Uber said.
“This led e-hailing operators to respond and come to the area and after an hour, no surge multiplier was observed. Dynamic pricing ceases after the spike in demand is met, and pricing returns to the normal level.”
How the price multiplies
Until recently, Uber said it has used different maximum surge multipliers in different cities across South Africa.
However, the company said that caps have now been standardised across South Africa.
Uber said its dynamic pricing works by increasing prices for the passenger by a stated multiple (e.g. 1.1x and 2.5x) above the standard price based on the level of demand for rides relative to the supply of operators available in a local area.
For example, the fare from 77 Meintjies Street, Sunnyside, Pretoria, to Menlyn Mall during normal levels of demand would cost approximately R106. However, during peak hours the cost of the trip at 1.2x or 2.6x multiples would be approximately R127.20 and R275.60 respectively.